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Author: 



Eddis, Wilton Clement 



Title: 




anufacturers' 



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Place: 



Toronto 

Date: 

1904 



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MASTER NEGATIVE # 



COLUMBIA UNIVERSITY LIBRARIES 
PRESERVATION DIVISION 

BIBLIOGRAPHIC MICROFORM TARGET 



ORIGINAL MATERIAL AS FILMED - EXISTING BIBLIOGRAPHIC RECORD 



• U 8 iNess 

460 • 
Ed2 



Eddis, Wilton Clement, 1855- 

Manufacturers* accounts; a text-book for the 
Lise of manufacturers, merchants, accountants and 
book-keepers, by "^Tilton C. Eddis ... and 'Till iam 
B. Tindall ... Toronto, Ed. and pub. by the 
authors, 1904. 

xix, 185 p. forms. 22^ \ 



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,. 



MANUFACTURERS' 
ACCOUNTS 

A TEXT-BOOK FOR THE USE OF MANUFACTURERS 
MERCHANTS, ACCOUNTANTS AND BOOK-KEEPERS ' 



BY 
* ' ' 1 . • ^ » I » * 



WlL-rON-G. : E-DDTS, F.C. A., 

PRESIDENT OK .TKD .IN5,T|ITOTE .Of.' CJJ'ApTERED ACCOUN 

ONMi^ip; ;aVO -Av-itiok -.6^ J'the manual fok 



ACCOUNTANTS,' CANADA, 



TAXTS OF 
OR 



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' *. > • 



. * • * I • * 

* t III • 

WILLIAM B. TINDALL, RCA. 



EDITED AND PUBLISHED BY THE AUTHORS 
MANNING CHAMBERS, TORONTO, CANADA. ' 



1904. 



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Entered actonling to Act of iVrliameMt ^^i*J('anaMa, :hy*\ViLTpN C. Eddis, 
F.C.A., at the Departmeirt if ^j;riluliuie.:Ott*>f^,;MaV, 1902. 



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MANUFACTURERS' 
ACCOUNTS 



f iii J 



PREFACE. 



1 



#. 



ti 



1 






PROBABLY' at no time in the Commercial History of Canada, 
has there been felt a greater need for some practical work- 
dealing,'- with the Accounts of Manufacturers, than at the 
present, and the Authors have endeavored in the foUovvino- 
pag-es to supply this want, not from a theoretical standpoint, 
but as the result of many years actual experience in several 
businesses. They have endeavored to treat this important sub- 
ject as practical Accountants for practical men. 

This book is intended to be a text-book for Manufacturers 
and Accountants, showing- how to keep Manufacturing Accounts, 
both as regards the cost and records of Manufacturing, and also 
as regards the keeping of the Commercial Accounts where these 
accounts refer to the cost and profits of such rhanufactured goods. 

In certain processes ot Manufacturing, it is both necessary 
and perfectly practicable to follow the cost of each manufactured 
article ; but again, in other classes of Manufacturing, it is, if 
possible, quite impracticable, owing to the immense amount of 
detail involved to apply the same system of Cost Accounts and 
obtain satisfactory results. To provide then a system ot Cost 
Accounts, applicable to all factories, it has been found necessary 
to separate them into two classes ; and in this book, it has been 
the Authors' effort, to prove that Cost Accounts are not only 
practicable, but readily applied, and the keeping of such are 
well jvvorth the small amount of extra Book-keeping. 

Besides submitting approved and useful forms for recording 
the cost of Manufacturing, specimen accounts of varied Manu- 
factories have been worked out and illustrated, and the forms 
of books which are given in Part III, are such as will be found 
useful and enhance the value of work as a book of reference for 
the office. 

[V 1 



^ 



I 






CONTENTS. 



Chai'Tek I — Intkodimtion. 

What does the article actually cost ? In early days profits large — 
necessary to know cost of Labor, Material and Expenses. Factories 
should be divided into two classes, and each class reijuiring separate 
system of accounts. Definition of terms used. 



Pages 1-7 



Chapter II — REVENrE Accodnt, 

« 

What a revenue account is. Should be divided into Manufacturing 
Account, Trading Account and Profit and Loss Account. Classification 
of Accounts and P'xpenses chargeable to Manufacturing Account. Im- 
portance of keeping proper and uniform Trading Account, so that period- 
ical percentage comparison can be made. Pages 8-15 

Chapter III — Special Books used in Cost Accounts, and 

THEIR relation TO THE CoMMER<'lAL BoOKS. 



Commercial Books, and Special Books used, shewing useful forms 
where required — Importance of keeping careful record of Freight and 
duty, keep few accounts in General Ledger, but shew full particulars in 
detail book. Factories under Class II, what forms to use, Cost Ledger 
Account, what it is. Estimate Book, importance of. Cost Ledger, full 
explanation of. Order Book, remarks on. Monthly Summary of work 
done with P^stimated Profits shewn. 



Page 10-49 



Chapter IV — Wages. 






Wages divided into two main classes — productive and unproductive. 
Shewing forms of W^ages Sheet and when applicable. Premium plan of 
paying wages. 

[vii] 



Pages 41» (H) 



viii CONTEXTS. 

Chapter V -Material. 

How to keep proper record of all Material and Stores, Storekeeper's 
duties, where one is kept. Stores Ledger should l)e kept. In factories 
under Class I— Material charged to Job. In factories under Class H — 
Material charged to Department on Processes. Numerous illustrations 
given. Cost Accounts largely supply the place of personal supervision. 
Matt-rial when wasted cuts into Profits. Pages 61-74 

Chapter VI— Factory Exi'Fases. 

First part for Factories coming un<ler Class 1. Some correct basis 
must be established in charging manufactured goods. Illustrating the 
method of fixing percentage of Expense to charge. Prime Cost as com- 
piired with selling price. Competition forcing articles to be sold at a loss 
— Manufacturers should know what this loss is. Pages 75-81 



PART II. 

Chapter VII — Cost AccorsTS for Boiler ash Engine 
Manitfactukeius and Coxtractin<; Enoineers. 



^t 



:^? 



CONTENTS. 



Chapter IX — Litaiber Manufacturers" Accounts. 



IX 



Work re<|uired to be done, 
kept at Camps and Head Office. 



Balance Sheet. Accounts to be 

Pages 12o-14o 



Chapter X — In Conclusion. 

The normal output of the factory. An important point to be con- 
sidered in establishing ratios of Expenses. Volume of business done 
affects profits. 

Percentages on Sales.— Illustration fullv worked out shewing 
Trading and Profit and Loss Account. Short and practical method of 
establishing percentage tables for reference and comparison with jwist 
and future business. 

Depreciation. — Remarks on and how to treat same in Books. 
Esti.matin<; Waste in figuring up Costs. Special remarks and 
illustrations. Pages 14fvl54 



P.ART in. 



Chai'Ter XI F<ti;.Ms ok Books ani> Accoints. 



Shewing that the adoption of Cost Accounts does not disarrange 
the present books. Shewing proprietor's balance sheet, and accounts to 
be opened and Entries to be passed— Dealing with S^Kicial Order and 
tracing it right through all the l)Ooks, sliewing its cost, profit thereon 
and how the items of Cost, Labor, Material and Factory Expenses are 
recorded, with all the Books used. Connecting the Cost Accounts with 
the Commercial Books. Full remarks on tHe Cost Account as kept in 
the <;eneral Ledger. Pages 85-108 

Chapter VIII— Factory Comin<; Under Class II 
— Can dy M a vu factc r er. 

Shewing how to prepare and start a set of books. Following pro- 
cess right through with l)ooks and forms recommended. Importance of 
checking Stores and Raw Material. Shewing reports of Material used, 
I^bor, etc., and (quantities and Values of goods Manufactured. Monthly 
summaries shew business done and Estimated profits. Pages 109 124 



1^ 



Cash Book, (ieneral form — Form providing Cash Column — Foiiii 
t\)r use with Bank Journal — Petty Cash Book. 

PURCHASE Journal. (ieneral form — Purchases returned— Sales 
returned. 

Distribution Journal. 

Bills Payable Book. 

Bills Receivable Book. 

Columnar Ledc^kr Accoint Form of. 

Balance Sheet. 

Sto( K oi Storks Sheet. 

Daily Rei'ort of Sales. 

Sales Book. 

C.O.D. Sales Recister. 

Monthly Statement — Foini of. I'ages 15.")-185 



i 



INDEX TO FORMS AND BOOKS USED. 



"1 



ii 



Kdiiii No. 



1. 



4. 
."). 
«). 

S. 

u. 

10. 

11. 

1-2. 
l.S. 
14. 

](). 
17. 
IS. 
H». 
■2i}. 
21. 

24. 
25. 
26. 



27 



28. 
2i>. 
.SO. 
81. 
32. 
33. 
34. 
3,-). 
3H. 
37. 



Manufacturing and Tiading Account 

ManufcW'turing Account 

Punliase Journal 

Fieiglit and Duty Stamp 

< Jeneral Expenses in Detail Book 

Material Journal 

Purcha.se Journal for (ioods other than Raw Material 

Specimen Rubber Stamp 

Cost Ledger Account in General Ledger 

(Jost Ledger, Onlers or Jobs 

('ost Ledger. Factory or Work.shop Expenses 

Costs of Order Completed 

< )rder Book 

Monthly Summary of Completed Jobs 

Wages Sheet 

Piece Work Time Sheet 

Daily Wages Sheet 

Wages Summarised for Cost Ledger 

Wages Sheet Processes 

Storekeepers Day Book 

Materials used in Manufacturing 

(lomls Manufactured 

Balance Sheet, Boiler Maiuifacturer 

Cost Ledger, shewing Order Completed 

Wages Sheet, Jas. Wilson 

Purchase Journal, applied to Special Business 

Storekeeper's Journal, applied to Special Business ... 
Monthly Summary of Cost Ledger, Special Business. . 

Cost Ledger Account in (General Ledger, Special 

.Material Journal for Candy Manufacturer 

Material Ledger Account 

Daily Report Sheet, Fondant Room 

Daily Re])ort Sheet, Chocolate Room 

Dailv Report Sheet, Boiling room 

Materials used. Candy Manufacturei- 

Coods Manufactured, Candy Manufacturei 

Balance Sheet, Lumber Manufacturer 

f xi 1 



Page. 



11 
13 
20 
22 
2."» 
2ti 
27 
29 
31 
3(i 
37 
3S 
41 
43 
52 

r3 

54 

'iry 

5S 

64 

69 

70 

87 

90 

92 

96 

9H 

102 

104 

111 

114 

116 

117 

117 

119 

\'2H) 

127 



Xll 



INDKX TO FORMS AND BOOKS USED. 



Form No. 

3S. Lumber Manufacturers" Accounts 

Provision Account 

Stal>le Account 



ail. 
40. 
41. 
42. 
43. 
44. 

4r>. 

46. 
47. 
4S. 
41). 
50. 
51. 
"vi. 
.-)3. 
r>4. 
o5. 
■)6. 

r>s. 

")9. 

H2. 
fi3. 
«4. 

«6. 
«7. 
68. 
HJ>. 
70. 
71. 
72. 
73. 



Fajfe. 

130 

130 

132 

< General Expense Account 132 

Van Account 133 

Wages Account, Special 133 

Lunil)er Manufacturers" Account 134 

Lumber Mainifacturers' Account 134 

Lumljer Manufacturers' Account 1.35 

Time Sheet, Special 1.36 

Wages Hook, Special 139 

Report of Lumber Sawn, etc 1 '2 

Lumber Sales Book 143 

Shingle Mill 143 

Log Trading Account 144 



Lumber Trading Account 

Shingle Trading Account 

Lath Trading Account 

Cash Hoc^k. ( ieneral 

Cash Fiook, ( Jeneral 

Cash Book to be used in Conjunction with Bank .Journal 
Bank Journal 



144 

145 

145 

159 

KiO 

161 

1(»2 

Petty Cash Book 1()3 

165 

166 

167 

. . 169 

... . 171 



Purchase Journal 

Purchases Returned 

Sales Returned 

Distribution Journal 

Bills Payable Book 

Bill.s Receivable Book 

Columnar Ledgei- Account 

Balance Sheet .• . . . 

Stock Sheet . . 

I >aily Report of Sales 179 

Sales Book 1 SI 

C. O. 1 ). Sales Register 1 S3 

Monthly Statement 1 S5 



172 
173 
175 
177 



• 



\ 



INDEX. 



Pa<,'es. 
88 
127 
175 
162 
170 
172 



157 
157 
182 
23 
173 
6 
5 



Balance Sheet, Boiler Manufacturer 

Balance Sheet, Lumber Manufacturer 

Balance Sheet, Specimen Form 

Bank Journal . . 

Bills Payable Book 

Bills Receivable Book 

Bookkeeping, First-Class Defined r^ 

Bookkeeping, Remarks On ^^^ 

Candy Factory, Books for ^j^, 

Candy Manufacturer's Accounts jj,t) 

Cash Book, Balancing Cash Daily 

Cash Book, Remarks on 

C. O. D. Sales Register, Form of 

Columnar Bookkeeping, Remarks on 

Columnar Ledger Account, Form of 

Commercial Books, Definition of 

Competition, Factor in Selling Price 

Cost Account in the General Ledger jQg 

Cost Accounts, Boiler and Engine Manufacturers and Contracting 

Engineers ^r 

Cost Accounts, As Kept Apart From Rest of Books 17 

Cost Accounts, Class .1., for Manufacturers, Defined ig 

Cost Accounts, Class IL, for Manufacturers, Defined is 

Cost Accounts, Foremen Watching Their End of Business 17 

Cost Accounts, List Special Books and Accounts 19 

Cost Accounts, Object of i,.^ 

Cost Accounts, Special Remarks 26 

Cost Accounts, Their Effect on Foreman 73 

Cost Ledger, Difference Between it and Cost Ledger Account 30 

Cost Ledger, Divided into Two Parts 35 

Cost Ledger, Factory or Workshop Expenses 37 

Cost Ledger, Factories, Class 1 3^ 

Cost Ledger, Importance of Knowing Cost of (ioods 47 

Cost Ledger, Orders or Jobs 3^ 

Cost Ledger Account, Definition of -29 

Cost Ledger Account and Cost Ledger 3^ 



2^ 



[ xiii ] 






XIV 



INDEX. 



Pages. 



Cost Ledger Account, Factory Expenses Closed Periodically 39 

Cost Ledger Account in (reneral Ledger -^ 



104 
35 
90 



31 

105 

45 

91 



Cost Ledger Account, Fiorm of 

Cost Ledger Account, Special Business 

Cost Ledger Account, Entries to Close ' 

Cost Ledger Account, Order Completed 

Cost Letlger Accounts, Closing of ^^ 

3 

, 38 

' 18 

' ' 18 

\ \\ 6 

29 



Cost of Article, What Is It ? 

Cost of Job Completed, Figure No. 12 
Definition, Class I., Cost Accounts. . . . 
Dehnition, Class II., Cost Accounts. . 

Definition, Commercial Books 

Definition, Cost Ledger Account 

Definition, Manufactured Prtwiuct. ... 

Definition, Prime Cost 

Definition, Trading Account 

Definition, Workshop Expenses 

Depreciation, Remarks on, 



/ 



6 

9 

150 

Account 1^" 

33 

168 

22 

32 

4 

44 

107 

42 

4 



Direct Expenses, Charged to ( Jeneral Ledger 
Distributing Expenses as Regards Estimating Costs . . . 

Distribution Journal 

Duty Paid, Rubber Stamp for 

Estimate Book. 

Estimate, Practical Illustration 

Estimated Expenses, in Summary Register 

Estimated Expenses, Shewn in fJeneral Ledger Account 

Estimates, Made by Different Persons 

Estimates of Foremen, Require Verification 

Estimating Costs, Special Remarks on ^^^ 

Estimating Expenses, Notes on ^^ 

Expense Account, Remarks on ^'^^ 

Expense Detail B(X)k, Furnishes Particulars for Expense Account in 

Balance Sheet ^^ 

Expen.se of Pro<luction, Factories, Class II '-'- 

Expenses, Special, Entered in Supplementary Division of Profit and 

Loss Account 

Factories, Class I. , Cost Ledger 

Factories, Class I. , Piecework Time Sheet 53 

Factories, Class I., Wages Sheet 



15 
34 



52 



Factories, Class I., Wages Sheet, Daily '"^^ 



55 



Factories, Class L, Wages Summarized for Cost Ledger 

Factories, Class II., Dealing with Material Purchased 67 

Factories, Class II., Gootls Manufactured "^ 



r 



INDEX. XV 



raj,a'8. 



Factories, Class II., Example, Candy Manufacturer 109 

Factories, Class II., Material, Keeping Track of Quantities. ... ... 115 

Factories, Class 11. , Materials Used in Manufacturing. 69 

Factories, Class 11. , Wages Sheet 58 

Factory Accounts, Remarks on 16 

Factory Expenses, Compared with Estimated Expenses in Summary 

Register. 44 

Factory Expenses, Difficulty in Distributing 80 

Factory Expenses, Division in Cost Ledger 4b 

Factory Expenses, Establishing Ratio With Other Items of Cost .... 76 

Factory Expenses, Estimated on Cost of Labor .32 

Factory Expenses, Factories, Class I ... 75 

Factor}' Expenses, Rate Based on Normal Output., . 146 

Factory Expenses, Shewn in General Ledger Account 107 

Factory or Workshop Expenses, Defined 9 

Factory, Should It Show Profit ? 66 

Factory Wages, Charged to General Ledger Account 107 

First-Class Bookkeeping, Defined 50 

Fixed Charges 33 79 

Freight in, Rubber Stamp for 22 

General Expenses, in Detail Book 25 

(Jeneral Ledger Accounts, Keep as Few as Possible 23 

Goods Manufactured, Candy Manufacturer 120 

(ioods Maruifactured, Arriving at Cost 121 

Gross Profit, Com])ared With Sales 14 147 

Gross Profit, From Summary Register 44 

Gross Profit, Shewn in Trading Account 8 

Interest on Capital, and Working Expenses 9 

Invoices, Numbered by Stamp 28 

Jobs, Monthly Summary of Completed 43 

Jobs or Orders in Cost Ledger 35 

Jobs, Should be Indexed 42 

Labor, Item of Estimate Book 32 

Labor, The Basis of Estimating Factory Expenses 32 

Labor, Tracing Same Through Special Order 93 

Lath Trading Account 14(> 145 

Log Trading Account 14() 144 

Loose Leaf Ledger 38 

Lumber Manufacturer's Accounts 125 

Lumber Sales Book 143 

Lumber Trading Account 140 144 

Machine, Cost of, and Parts 93 

Machinery Account Required to be Watched 151 



XVI 



INDEX. 



INDEX. 



XVll 



Pajjres. 

Machinery, As Atfecting the Coyt of (Joods 7s 

Machinery Register, Remarks on 150 

Machinery, When Estimating Costs 33 

Mann, John, Quotation from Pamphlet g 

Manufactured Prodjct, Elements of 7 

Manufactured (Joods, Charge Account, Candy Manufacturer 123 

Manufactured Stock Account, Charged with Cost of Coods 85 45 

Manufactured Stock, What Charged with, 30 

Manufacturers, Divided into Two Classes 5 

Manufacturing Account and Revenue Account 9 

Manufacturing Account, Should Rent be Charged ? 12 

Manufacturing Account, Specimen Ruling ..11 13 

Manufacturing Establishments, Rubber Stamp for 29 

Manufacturing or Trading Accounts, Reasons for Keeping 14 

Material, Chapter on 61 

Material, Charged to General Ledger >\ccount 107 

Material, Cost of l^anding in Factory 9 

Material, Division Manufacturing Account 9 

Material, False Basis for Estimating Factory Expenses 77 

Material, Item of Estimate Book . 32 

Material, Points in Cost Accounts 99 

Material, Received in Factory, How P^ntered 30 

Material, To Find Quantity Used in Each Department 115 

Material Journal, for Candy Manufacturer 109 1 1 1 

Material Journal, Form of 26 

Material Ledger, How to Start 112 

Material Ledger, Candy Manufacturer II 4 

Material Stock Sheet, Form of 176 

Material, Tracing Same Through Special Order 94 

Materials Used in Manufacturing, Example 119 

Merchandise Account, Transfer of Freight and Duty 28 

Monthly Statement, Form of 1S4 

Monthly Summary, Closed into Commercial Books, Special Business. . 108 

Monthly Summary, Completed Jobs 44 

Monthly Sunimary, Cost Ledger, Special Business 102 

Nor nal Output, in Estimating Costs 32 

Normal Output of the Factory 146 

OtHce, Must be Up-to-date 3 

Order Bo<jk 39 

Onler Book, Specimen Form 41 

Order for Automatic Vertical Engine 88 

Order for Engine, Completed }M) 91 

Orders in Course of Manufacture 38 



ir 



Pajjes. 
Orders or Jobs, in Cost Ledger 35 

Orders or Jobs, Monthly Summary of Completed '43 

Orders or Jobs, Should be Indexed 40 

Orders Should always be Referred to by Number 93 

Partly Manufactured Stock, Value of 45 

Percentage of Profit, ShoMn in Trading Account 14 147 

Percentage Statement, What it Should Contain ir> 

Percentages on Sales, Practical Illustration 147 

Petty Cash Book, Ruling of 

Piece Work 

Piece Work, Advantage ot Recording Time 59 

Piece Work, Time Sheet -o 

Prime Cost, Definition of 

Prime Cost of Goods Manufactured in Summary Register 

Prime Cost of Manufactured Stock as shewn in General Ledger 47 

Processes, Following Cost of j^^ 

Processes, In Summary Register 

Productive Wages 

Profit and Loss Account 

Profit and Loss Account, Charged with Expenses of Management 

Profit and Loss Account, Comparing Items in 14 

Profit and Loss Account Shew Profits Resulting from Business above 

Normal ■ j^y 

Profit and Loss Accounts, Remarks on 15 

Profits, How Arrived at 

Purchase Journal, Cost Ledger Account 

Purchase Journal, Specimen Ruling 20 

Purchase Journal, For Goods Other chan Raw Material 

Purchase Journal, How can be Subdivided 

Purchase Journal, Shewing General Form 1^4 

Purchase Returned Book jgg 

Raw Material, Divided into Sub-Headings, Illustration uO 

Raw Material, How to Value in Costs g^ 

Raw Material, Increase in Value as Regards Profit gy 

Raw Material Used, Arriving at Value 121 

Raw Material, When Sold ^g 

Raw Material Journal, Form of 

Rent, Should this be Charged to Manufacturing Account 

Reserve Account, for Depreciation 

Revenue Account, Subdivision of 

Sales Account, Compared with Items in Trading Account 14 

Sales, Form to Calculate Percentaites on . 

Sales Book, Form of iu<j 



1«8 
50 



6 
44 



44 

49 

148 

15 



72 
29 

21 
H 
28 



26 

12 

151 

8 

147 

147 



i 



XVlll 



INDEX. 



Pajfe* 



Sales Reiuriieil Book 

Selling Expenses, as Regards Estimating Cost 

Selling Price, Points to Determine 

Separate Ledgers, Remarks on 

Shingle Trading Account, Form of 1-40 

Small Profit, Better than Factory Lying Idle 

Special Bo<jks Used in Cost Accounts 

Stock on Hand, Verified by Trading Accounts 

Stock Sheet, Form of 

Storekeepers l>ay B<Jok, Form of 

Storekeepers Duties 

Storekeeper's Journal, Special Business 

Stores Detine<l 

Stores, How Charged Thiough Purchase Journal 

Stores Issued 

Stores, Methoil of Averaging Prices 

Stores, Record of 

Stores Valuable Assets, Notes on 

Stores Ledger, Defined 

Stores Ledger, An Expensive Luxury 

Stores or Material Ledger, How to Start 

Stores Sheet, Form of 

Summary of Completed Jobs 

Summary Register 

Time, As Valuable as Material 

Time Sheet, Lumber Manufacturer 

Trading Account, Comparing Items in 

Trading Account, Definition of 

Trading Account, Form of 

Trading Account, Revenue Account 

Trading Account, Specimen Ruling 

Trading Account, Why it Should be Kept 

Unpnxluctive Wages 

Van Account, Define<l 

V^olume of Business, Bearing on Expenses 

Voucher System, for Cost Accounts 

Wages 

Wages and Salaries, Con)pare<l with Sales 

Wages, Biisis for Estimating Factory Costs 7(» 

Wat'es Divided into Two Classes 

Wages, Paid to PriMhutive Workmen 

Wages, Premium Plan of Paying 

Wages, Second Division Manufacturing Account 



167 

33 

4 

158 

145 
80 
16 
15 

176 
64 
6-2 
98 
65 
30 
•24 

100 
61 
71 
62 
73 

112 

176 
43 
44 
72 

136 

14 

6 

147 

8 

11 

14 

49 

129 
14 
38 
49 
14 
32 
49 
9 
60 
9 



INDEX. 



XIX 



Pages. 



Wages, Summarized for Cost Ledger. ... 55 

W^ages Book, Lumber Manufacturer 

Wages Sheet, Applied to Special Business 

Wages Sheet, Daily 

Wages Sheet, Form of 

Wages Sneet, Processes Arranged 

Waste, An Element of Cost 

Workshop Expenses, Affected by Volume of Business 

Workshop Expenses, Classification of 

Workshop Expenses Defined 

Workshop Expenses, Estimated on Cost of Labor 

Workshop Expenses, Third Division of Manufacturing Account 



139 

92 

54 

52 

58 

152 

14 

9 

9 

32 

9 



k 



- 



1 



tm^^H^mff W^' 



+■ 



* Ji 



PART I. 







CHAPTER L 



INTRODUCTION. 



How much does the article actually cost us, and at what 
price can we afford to put it on the market with goods from 
other countries of a similar nature, is the question the Canadian 
Manufacturer of to-day is asking- his partner or the mechanical 
expert who superintends his business ; and in the following- 
pages we will endeavor to show how the question can best be 
answered. 

In the early days of the country, when the manufacturer 
had an establishment of a size that he could personally super- 
vise every operation necessary to the making of the article that 
he was engaged upon, he could tell with a degree of practical 
accuracy, all that was necessary to enable him to sell at a profit, 
particularly as the profit obtainable was large and competition 
not so keen, nor consumer so critical as at the present day. 
But with conditions changed, and Canada's manufactures 
being produced by the aid of the latest and most up-to-date 
automatic machinery and scientific processes, the oflRce must 
not be one whit behind the machinery, but must be up to 
date ; and the Principal must be sure that the information he 
receives from his office is accurate, and to be relied upon in 
every particular. 



'rf. 
I*. 



MANUFACTURERS ACCOUNTS. 

In determining the price that he can afford to sell an 
article at, every manufacturer requires to know the following 
particulars : 

(a) How much has the labor cost me. 

(b) How much has the material cost me. 

{c) How much of my General Expense Account to 
carry on my business should this particular article pay. 

(d) How much profit over and above this can 1 
get and place it on the market. 

Some will tell the enquirer that this is an easy matter and 
that they experience no difficulty, that their foreman can 
accomplish this without any system of book-keeping, and more- 
over that the cost of getting this information by any system of 
book-keeping is greater than the benefit derived from it. But 
the trouble with the estimates of the foreman is, that they are 
always based on the best that can be done, not on what is done, 
and are really more the estimates of what the articles should 
cost under favorable circumstances, and not what such articles 
do and have cost under the existing conditions of manufacture. 
In such figuring, how often is it that only the aforesaid favor- 
able circumstances are taken into account and the unfavorable, 
which are never pleasant, lost sight of? 

This might be illustrated practically as follows : — 

An estimate is required as to the cost of running a large 
quantity of hardwood flooring through a planing machine. 
The capacity of such machine may run from 50 to 80 lineal 
feet per minute. The foreman will almost invariably err on the 
side of basing his cost on the best work this machine can turn 



I 



INTRODUCTION. 5 

oat, instead of on the work actually done by it day in and day 
out, as recorded on his time sheets. 

Now, what the manufacturer who is to make a success of 
his business wants to know is, what did these goods cost me, 
and does the cost balance my books and account to me for 
every item of expense in connection therewith. 

Then as he finds competition keener and more aggressive, 
he will have some facts before him which will enable him to 
come to some determination as to whether he can produce the 
article cheaper, say by altering the size or cheapening any of 
the material composing it, or by cheapening the cost of the 
labor, or reducing his expense account by more economical 
methods in his factorv, or reducing the waste that takes place 
in the manufacture, or utilizing such waste by putting in 
improved machinery. 

At the outset the authors were confronted with this diffi- 
culty, that it seemed almost impossible to design books that 
would be suitable to all and every kind of manufacturing 
business. 

This difficultv is largelv overcome bv dividini*- all nianu- 
factures into two classes, the nature of each class being clearly 
defined. This matter is gone into fully in Chapter III (see 
page 18), and we believe that if the principles laid down in this 
work are carefully studied and followed, any good book-keeper 
can so arrange his books that any special difficulties which mav 
pertain to a particular business can be provided for, and an 
accurate cost, which will be verified by the books of account, 
and in one sense form part of them, be procurable at any time. 

Before proceeding further, let us define some of the terms 
we use in discussing this question of cost accounts. 



■PftHBHJPI 



'•^-*«;-*»-«rf. 



MANUFACTURERS ACCOUNTS. 



Prime Cost. 

To make our meaning of this term clear, we cannot do 
better than quote from Mr. John Mann's excellentipamphlet 
** Notes on Cost Records: " 

" Prime cost is, of course, literally first cost, and I use the 
phrase to mean the sum expended by a merchant or bv a 
manufacturer in purchasing- what he sells, which may be either 
a complete article to be sold just in the form in which it is 
bought, or raw material plus the labor of manufacturing same 
into a complete article." 

In our opinion as to what items are included in the prime 
cost is a question which must be decided by the management. 
As, for instance, one manufacturer may own his land and 
buildings, and may be manufacturing goods of entirely different 
kinds on the same premises, and for politic reasons may not 
deem it necessary to apportion a rental value to each building, 
but look upon the whole premises as an investment and expect 
a certain return on the whole. 

Another may rent his premises and also his motive power, 
and follow Mr. Mann's plan exactly. Who can say which one 
is right ? 

Commercial Books. 

These refer to the ordinary books of account of a manu- 
facturer, such as Cash Book, Ledger, Journal and other books 
which are used to record his dealings with the public, co-partners 
or shareholders. 

Trading Account. 

This is an account shewing the gross profit of a trading 
concern, that is the difference between the cost of production of 
goods sold and the proceeds of such a sale. 



A^ 



I Prime 
' Cost. 



of Plant 

and 

Buildings. 



INTRODUCTION. / 

Mr. Mann divides a manufactured product into its elements, 
as follows : — 

Elements of a Product. 

( 1 ) Material 

(2) Labor 

(3) Departmental or Direct Expenses of Pro- 

duction 

VVatres of Superintendence and Foremen 

Lighting ^ 

Heating 

Rent , 

Taxes 

Insurance 

Depreciation <fe Upliolding 
(4) Indirect Expenses (Distribution and Administration) 

Salaries of Officers and Directors 

Upkeep of Office and Warehouse 

Interest and Financing p]xpenses 

Travellers" Salaries, Commissions and Expenses. . 

Bad 1 )ebt Reserve 

(5) Profit 



in 



Cost. 



J 



j Selling 
' Price. 



CHAPTER 11. 



REVENUE ACCOUNT. 

This is an account into which periodically are closed all 
those accounts which record the income, and expenses or losses, 
of the business, whether same have actually been received or 
paid in cash or not. 

The Revenue Account forms an important part or addendum 
to the Balance Sheet, shewing as it does these particulars ; and 
it should in a manufacturing business be divided into at least 
three main parts, (viz.) : ist. The manufacturing which shews 
the cost of the goods manufactured for any determined period, 
and the component parts which make up such cost. This part 
is then transferred to the second section, the Trading Account, 
which includes all the manufactured goods bought, if any, and 
generally all the sales. This section shews the gross profit for 
the period. This gross profit is then transferred to the third 
section, the Profit and Loss Account, which gives the net profit 
or loss of the business. 

This last section includes all the costs of management and 
also sources of income and expenses not directly belonging to 
the business and which can if wished be shown in a further 
subdivision. The same principles apply when departmental 
accounts are kept. 



t 






■t 



REVENUE ACCOUNT. 



9 



It is however with the Manufacturing and Trading Accounts 
more than with the Profit and Loss Account that Cost Accounts 
come directly in touch ; because as the Merchandise Accounts 
shew the total cost of merchandise bought, and the value o\' 
the merchandise on hand, so does the Cost Ledger shew the cost 
of the items, making up this total ; and also the value in detail, 
or on any average basis, of the merchandise on hand and in 
course of manufacture. 

The debit side of the Manufacturing Account can be divided 
into three main divisions, which are : 

(i) Material. (2) Wages. (3) Workshop expenses. 

These subdivisions are simply descriptive and can be further 
subdivided as the nature of the business may require. 

(i) Material will naturally cover the cost of landing it in 
facto 
'' Dutv." 



the factorv and will include such items as " P>eight in " and 



(2) Wages covers all wages paid to productive workmen, 
whether it be for piece work or day w- jrk. 

(3) W^orkshop Expenses — Under this heading will be included 
the follow^ing items : 

Wages of foreman ; w^ages which may be classified as unpro- 
ductive and includes such work as cleaning up, etc.; oil, etc., 
for machinery; repairs and renewals ; power (water, steam, 
or electrical) ; rent, rates and taxes ; heating ; all expenses 
incidental to the workshop and primarily caused by the manu- 
facturing processes. 

In some factories interest on capital invested in factory or on 
plant, etc., is here included, but we do not recommend this 
being charged. 



10 



MAXUFACTUREltS ACCOUNTS. 



In the former chapter it was explained what was meant by 
the prime cost of an article, and it can be readily seen that the 
Manufacturings and Trading Accounts deal with the prime cos 
of goods manufactured. A simple form of Account shewing the 
balance of Manufacturing Account transferred to Trading 
Account is here given. 



REVENUE ACCOUNT. 



11 






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12 



MANUFACTUUERS ACCOrNTS. 



Some Accountants and Manufacturers differ as to what 
should be charged or credited to the Manufacturing Account — 
as, for example, should the rent of the factory be charged to 
this account and thus form part of the prime cost or not ? 
What is to be looked upon as prime cost must be carefully con- 
sidered and decided by the management, and the proper ac- 
counts consistently charged. 

In Fig. No. 2 is shewn another form of Manufacturing 
Account which is specially suitable for a factory, where it is 
practicable to follow the detailed cost of every article manufac- 
tured. In this form it will be noticed that the Trading Account 
is charged with the manufactured goods as received from the 
factory, and the account is adjusted at the end of the period. 



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REVENUE ACCOUNT. 



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14 



MANUFACTURERS ACCOUNTS. 



In certain manufactories it is usually only practicable to 
follow through the cost of the various processes, and note and 
compare this cost with the product obtained, valued at the 
selling prices. Especially is this the case where staple lines are 
manufactured. 

There is a further very important reason in almost every 
business of a manufacturing or simply of a trading nature why 
a proper and uniform Trading Account should be kept, and it is 
this : that the relative charges and receipts may be compared 
on a percentage basis with those of a different period. In most 
businesses there is a certain uniformity of profit which is 
obtained on the prime cost ; hence one would look as a general 
practice, apart from any rise or fall in the value of raw material ; 
for a similar ratio of profit to be made on future occasions. 

Consequently when a manufacturer does a steady business, 
one expects to find that the ratio of his gross profit as compared 
with his sales has not much changed as compared with the 
previous year. Certainly his workshop expenses will be rela- 
tively more or less as his volume of business decreases or 
increases, but even this can be fairly averaged over a term of 
years. 

It is usual to compare all the items charged to the Trading 
Account and Profit and Loss Account with the amount of net 
sales ; and if these items are all thus compared periodically in a 
statistical form, the information thus obtained is not only 
intensely interesting, but extremely valuable to the manage- 
ment. A good illustration of this may be given in the case of 
wages and salaries. Supposing the salaries, for example, have 
fairly maintained a certain percentage for several years as 
compared with the sales ; and the last accounts shew that this 



REVENUE ACCOUNT. 



15 



percentage has considerably fallen, what is the inference? It 
is that the staff have done more work for their pay, and may be 
entitled to consideration in the shape of increased pay, similarly 
if the percentage has increased it would show that the staff' had 
been better paid than formerly. 

Not only is it useful as just shewn, but it affords a check on 
the various expenditures in connection with the business, and 
further enables the Accountant to verify the amount of stock on 
hand, etc., though with Cost Accounts properly kept this can be 
checked in a different way. 

Profit and Loss Account.— The third part of the Revenue 
Account is charged with all the expenses of management, 
interest, rates and taxes, etc., and all costs incurred in sellin^r 
and distributing the goods. 

In some establishments there are often expenses or receipts 
which do not strictly belong to the business, but are more in 
the shape of charges or income from investments. When this 
occurs it is best to enter such items in a third, or supplementary, 
division of the Profit and Loss Account, which should also con- 
tain dividends paid, etc., or profits to Partners' Accounts. Such 
entries are usually easily verified as to their correctness and 
need not be included in the percentage statement before 
referred to. 



CHAPTER III. 



SPECIAL BOOKS USED IN COST ACCOUNTS 

AND THEIR RELATION TO THE 

COMMERCIAL BOOKS. 



ii> 



It cannot be denied, and indeed why should we attempt to 
do so, that there are many excellent works published on Cost 
Accounts or Factory Accounts as they are sometimes called. 
Some of these books treat the subject almost entirely from the 
factory manager's standpoint, and consequently deal very 
largely with manufacturing details, which after all are well 
known to most manufacturers ; and on the other hand others 
are written from the theoretical standpoint, and while possess- 
ing excellent and most ingenious ideas, are not practical, and 
moreover entail too much work. Cost Accounts to be practically 
useful must be so designed as to be kept either in the office or 
the factory. Or course where the factory is a very large one 
and a first-class clerical staff can be set aside for this work, 
well and good, but this is the exception. And from our own 
practical experience we have found, that while the materials 
tor these accounts must emanate largely from the factory itself, 
yet the compilation of them can be generally best done in the 
office, where the most talented and skilled clerical labor is 
naturally expected to be found. Otherwise such accounts start 
well for a week or two, and then not being used, are pronounced 

I 16] 



SPECIAL BOOKS USED IN COST ACCOUNTS, ETC. 



17 



of being no practical good at all. Some remedies to be usetul 
require of obvious necessity to be used, and that according to 
directions. While these Cost Accounts themselves are kept 
apart, yet they must form an integral part of the commercial 
books. The Cash Book certainly is an important item in any 
man's books, and yet it is balanced apart from the other books. 
A merchant readily grasps at the importance of tracing and 
accounting for every dollar that comes into his possession — 
cash is one of his important assets — but he has other important 
assets that he exchanges his cash for. Whether these assets 
consist of material, or expenses, or wages, they should be looked 
after even down to details, because after all they represent 
dollars and cents. 



il 



A certain percentage of every business must be allow^ed for 
working expenses. The manufacturer knows that it pays him 
to employ only first-class foremen — -some manufacturers have 
yet to learn that Cost Accounts properly kept are the medium 
by which they can learn whether the foremen are watching 
their end of the business. There is an old saying, " Quis 
custodiet custodies," who looks after the guardians ? Cost 
Accounts properly kept are a silent guardian for a business, 
which cannot be denied. 



Still further, these accounts must be so designed that 
without unduly increasing the clerical work they can be readily 
balanced in conjunction with the commercial books. 



It might perhaps be here explained, and also to make future 
references in the book clear, that in the Authors' opinion Cost 
Accounts should be divided into two main classes or divisions, 
as follows : — 



toirola i ffii '^N EMiityiw i ^^ 



I i 



I 1 



r 

8 if 



18 



MANUFACTURERS ACCOUNTS. 



Class i. For Manufacturers whose work is the manu- 
facture of any kind of Machinery and Tools or Articles of 
special form, the character of which renders it desirable that 
the cost o( each unit of the whole output for a given period 
should be known and accurately arrived at. 

Class 2. Industries which turn out goods more or less of 
one kind for consumption in the state in which they are turned 
out, such as bread stuffs, textile fabrics and miscellaneous 
merchandise of all kinds ; and also such as are more in the 
nature of materials for use by factories in Class i. Generally 
speaking Class 2 covers such commodities for which it is not so 
essential to fix the cost of value of each individual unit for any 
o-iven period, but rather that what is required is cost of 
processes and average price per yard, pound or ton, as the case 
may be. 

It is the object of this book to try and clearly enunciate the 
principles underlying the keeping of Cost Accounts, so that any 
practical Accountant can design and prepare intelligent and 
useful sets for any factory. 

Unfortunately this is a branch of the Accountant's profession 
that has hitherto received very little attention at their hands. 
Works on book-keeping are legion, but few of them touch on 
this subject, or, if they do, the information given is useless. 

We show some general forms of books and accounts, which 
should explain the methods to be adopted. It has been deemed 
best in shewing these forms to give them in blank, but in later 
chapters sets are shewn worked out in detail. 



I 



SPECIAL BOOKS USED IN COST ACCOUNTS, ETC. 



19 



* 






As this is not a work on book-keeping, only the special 
books and accounts required for Cost Accounts are here referred 
to, and these may be briefly enumerated as follows : — 

Commercial Books and Accounts — 

Purchase Journals or Invoice Books, 
Cost Ledger Account in General Ledger. 

Special Books — 

Order Book, or on separate sheets. 
Invoice Book, 
Estimate Book, 
Costs Ledger, 
Summary Register. 

Purchase Journal or Invoice Book. 

In Fig. No. 3 a useful form of Purchase-Journal is given. 
This book can be adapted for Factories coming under Class i. 






Tj i^ i *i ii i iii iimaifa . M:a »wr><~-y?i»y 



20 



Fig. No. 3. 



MANUFACTURERS ACCOUNTS. 



PURCHASE JOURNAL. 



Date 
Entered 



DC 



c 
5? 



NAME 



Fol, 



CREDIT 



Invoices 



Duty ] 
and 
Freight 



Stores 
Issued 



Sun- 
dries 



Credit 
Credit Account 
Proper \\ in [ 
Account! General ' (je^eral 



Credit 

Stores 

Account; 

in 



Ledger 



Ledger 



(Credit 

Proper 

Account 



P*A 



SPECIAL BOOKS USED IN COST ACCOUNTS, ETC. 



21 



PURCHASE JOURNAL. -Coutimied. 



CHARGE. 



Date Descrip- 



of 



tion and 



Invoice ' Quantities 



Account 

or 

Order 

No. 



Cost Ledger 



Works 

in 
Process 



Charge 

material 

account 

in Cost 

Ledger 

account 

in 
General 
Ledger 



Factory 
Expen's 



Stores 



General 
Expense 



Sunds. 



Charge 
Factory 
Ex- i 
penses ! 
in same j 
account 



Charge 

Store 

I account 

in 
General 
Ledger 



Charge 
Account 

in 

General 

Ledger 

and 

enter 
details 
in sub- 
sidiary 

book 



if 



22 



MANUFACTURERS ACCOUNTS. 



In certain factories, especially those under Class No. i, it is 
most necessary that the "Freight in" and "Duty paid" on 
goods should be known and properly recorded on the invoice 
itself. By using a stamp as shewn in Figure No. 4, and insist- 
ing on its being filled up before the cashier pays the cash for 



Fig. No. 4. 




same, much work may be saved in hunting up this information 
afterwards. The Purchase Journal as here shown in Fig. No. 3, 
specially provides for this. When the cashier disburses cash 
for "Freight in" and "Duty" he charges same to such account 
or accounts (if it is preferred to separate them) in the ordinary 
way through his Cash Book. When the invoices are entered in 
the Journal, the amounts are credited to the "Freight in" and 
"Duty" column and added to the material and properly charged 
on the contra side. In due course, presumably at the end of 
month, the total of the column in the Cash Book is charged to 
Duty, etc.. Account in the General Ledger, and the total of the 
duty column from the Purchase Journal is credited to the same 
account. If every invoice has been properly endorsed and 
entered in the Journal as regards the Duty, etc., this account 
will balance itself, thus proving the correctness of the entries, 
allowing of course for any items which may be outstanding. 



SPECIAL BOOKS USED IN COST ACCOUNTS, ETC. 



23 



Most book-keepers are familiar with the plan of transferring 
the balance of the accounts headed " Freight in " and " Duty " 
to Merchandise Account at the end of the year, but with a 
system of Cost Accounts, which requires that the true cost of 
each article should be recorded periodically, it can readily be 
seen how thoroughly and simply this plan provides for so doing. 
The Purchase Journal, as shewn, only provides for one depart- 
ment to which goods are to be charged. To subdivide and add 
additional columns is a very simple matter, but while the use 
of columnar book-keeping is a great help, it must constantly be 
borne in mind that its abuse is just the contrary. We saw in 
a book on " Factory Accounts" one tabulated plan of Journal 
with no less than sixteen columns. Such a book is an endless 
source of mistakes, from entering accounts in the wrong 
column, to say nothing of its size, or probably cramped spaces 
for figures. When a certain number of columns is necessary, 
and details are required of any heading it is best to record these 
subdivisions in a separate book or books. An illustration of 
this can be conveniently shown from Fig. No. 3, under the 
column headed "General Expense," it is here provided that all 
goods or expenses coming under this heading shall be entered, 
and further it is intended that such items shall be posted to a 
" General Expense Account " in the General Ledger ; but it is 
not intended that this account shall not be summarised and suffi- 
ciently detailed m the Balance Sheet. To provide for this an 
" Expense Detail Book " as shewn with columns as necessary 
can be kept written up (see Fig. No. 5)— the total of the columns 
will give the balance of the accounts in the Ledger ; and more- 
over a great deal of labor, to say nothing of Ledger space, will 
be saved in posting. 

As a general principle as few General Ledger Accounts 
should be kept as possible. 



24 



MAN U FACTURERS ACCOUNTS. 



SPECIAL BOOKS USED IN COST ACCOUNTS, ETC. 25 



By entering up the invoices in the Journal periodically, they 
can be sorted up, and arranged conveniently for posting. 

Column No. 4, of this Journal, Fig. No. 3, it will be noted, 
is headed ** Stores Issued," this column is not used when 
entering up the invoices, but provides a convenient place for 
recording goods issued by the store-keeper from his stores, and 
enabling the same to be charged to the proper account ; this 
will be fully dealt with in a subsequent chapter however. 

We are giving a somewhat lengthy description of this 
Purchase Journal, but in reality too much importance cannot be 
given to the proper treatment of material and stores, and all 
proper charges incidental thereto. By adopting some such 
system as here laid down, much valuable information can *e 
permanently recorded. Unfortunately, entries are so often 
made in books, possibly correct in themselves, but the inform- 
ation which would explain them is either isolated, or was 
simply a memo., so that when the entry is referred to after- 
wards, no one can explain it ; or endless papers have to be 
hunted through to endeavor to find out the " raison d'etre." 



/ 



4 



i 





In this same book can be kept details of all other accounts requiring similar treatment, allowing 
a page, or pages, for each heading. The addition of the Total Column will agree with the balance 
of the account in General Ledger. If any credits have to be posted simply substract amounts. At^ 
the end of the year, from this book, a detailed summary of the account can be prepared for the 
Balance Sheets. 




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manufacturers' accounts. 



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28 



MANUFACTURERS ACCOUNTS. 



The difference between the Figs. Nos. 3, 6 and 7 can easily 
be seen. Fig. No. 3 is intended for Factories under heading 
Class I, where necessarily much more detail work is involved, and 
where the details themselves are recorded in a Cost Ledger 
Account under the particular job or order. Whereas in F'igs. 
Nos. 6 and 7 to be used for Factories under Class 2, where we 
are dealing with the results and totals instead of individual 
articles, the information recorded is more of a general character. 






A little examination of the Journal Fig. No. 6, will show that 
this book provides the means whereby we can readily obtain 
month by month the total quantity of raw material purchased 
and its cost, also the quantities of the individual kinds or 
headings making up this total. In the General Ledger we 
simply record the Cost of the Material bought for the month, 
but from this Journal we can find out with little trouble the 
actual or average cost per lb. or other quantity or unit of each 
or any line of goods purchased. 

Where the Factories come under Class 2, and the processes 
only are being followed, forms numbered Figs. Nos. 6 and 7 are 
recommended. 

Where there are a large number of invoices it is a good 
plan to have a numbering stamp and file them away according 
to their numbers. Experience shews that it is far easier to file 
away and quickly turn up for reference documents put away 
in their numerical order, than under their alphabetical order, to 
say nothing of the fewer pigeon holes or drawers required in 
doing so. W^hen it is found necessary to refer to invoices it is 
comparatively little trouble to take a note o( their numbers as 
entered in the Ledger when posting the item. 



SPECIAL BOOKS USED IN COST AC^COUNTS, ETC. 



29 



Where invoices require constantly to be referred to, to 
obtain prices, putting them away in alphabetical prder is good, 
but indexing the names and the numbers of such invoices in a 
book is recommended. 

In dealing with invoices in connection with Manufacturing 
Establishments it is very important that the goods purchased 
should be charged to proper job or department, or expense, as 
the case may be ; and to ensure this being properly done and 
systematically, a rubber stamp or a series of rubber stamps 
should be provided for. 



Fig. No. 8. 



SPECIMEN STAMP. 



Date 

Charj^e Works No 

Charge Stores 

Charjie 

Goo<l8 Kecei\ ed h\ 






COST LElJl^KR ACCOUNT. 

In Purchase Journal Fig. No. 3, which refers to Factories 
under Class I, there are two columns headed ''Cost Ledger," 
to which are charged all invoices referring to any special or 
specific order. The reason for calling this account "Cost 
Ledger Account" in the General Ledger is simply to avoid 
confusing it with Merchandise or Manufactured Stock, and 
further it covers more ground than any simple heading, so we 
style it as given as a descriptive name. 



fSi^ mmU a mM i rmam^^m i m m 



30 



MANUFACTURERS ACCOUNTS. 



When material is received into the Factory it is entered in 
the Journal and charged under heading ''Stores," except 
specially ordered as above. Credit Stores and charge Cost 
Ledger Account through Purchase Journal when Stores are 
issued. The account also covers other items as will be seen 
from Fig. No. 9, wnieh is a copy of the account taken from the 
General Ledger in a simple form. It might be well here to 
explain the difference between the *'Cost Ledger" and the 
*'Cost Ledger Account. " The Cost Ledger is a separate Ledger 
in which are entered in detail all the items which are shewn 
summarized in the Cost Ledger Account, which is one of the 
regular accounts in the General Ledger. The term General 
Ledger is here used, because in business of any size now-a-days, 
where the books are well designed, it is usual to have a 
Bought Ledger, Sales Ledger, General Ledger, etc. 

This Cost Ledger Account then is simply a collection of 
various Factory Accounts. As each job is finished its record is 
kept in the Cost Ledger, and monthly or weekly a summary of 
all completed jobs or of the various processes as the case may be 
is prepared, and ''Manufactured Stock" is charged with the 
items composing same, and the Cost Ledger Account is credited 
therewith in its proper columns. This is fully gone into under 
the explanation given on the Cost Ledger later on. 



SPECIAL BOOKS USED IX COST ACCOUNTS, ETC. 



31 





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32 






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manufacturers' accounts. 



Estimate Book. 



In an Estimate Book the following items of cost have to be 
provided for : 

(i). Material. 

(2). Labor. 

(3). Proportion of Workshop Expenses. 

(4). ♦• . " Distributing " 



In considering these it has to be decided whether these costs 
shall be figured on the present year's business, or last year's 
business, or on an average output taking one year with another. 
The first would not be satisfactory as the amount could not well 
be determined until end of period ; but the third is the one that 
will orive the most satisfactorv results. Every manufacturing 
establishment has a normal output, which is generally known 
as the capacity of the factory or plant, and such is the amount 
that should be taken. 

Proportion of Workshop Expenses. 

This is in some Manufactories under Class i a most difficult 
matter to arrive at when starting Cost Accounts. Every 
Manufacturer has his rule of so much per cent, for profit, but, 
unfortunately, at the end of the year the profit does not always 
pan out. In a proper system of Cost Accounts, fortunately, 
these estimated Expenses can always be verified by the actual 
Expenses incurred up to any given date, and the information 
thus obtained utilized for future estimating. Experience has 
shewn, as a general rule, that the safest plan is to base the 
Estimated Workshop Expenses on the Cost of Labor. By 
ascertaining the amount expended on Wages paid for productive 
labor for any given period, the longer the period the better, 






r-'^^- -0 



SPECIAL BOOKS USED IN COST ACCOUNTS, ETC. 33 

and then ascertaining the amount of the Workshop Expenses 
for the same period, a ratio between the two can readily be 
obtained. In other words, the Workshop Expenses will be 
such and such a percentage of the Wages, and thus a generally 
reliable guide in estimating this Expense is obtained. As 
regards the amount of distributing or selling Expenses- these 
come under the heading more of Fixed Charges, and will not 
be so much affected by the amount of business done as are 
Wages or Material used. Again, experience shews that the 
percentage to be charged for this Expense is generally best 
obtained by ascertaining from the Trading Account^ or from 
the Commercial Books if a new business, what the ratio of this 
item is as compared with the material and labor combined, or 
the ratio can be made with the sales. 

In some Factories where Machinery largely takes the place 
of workmen, and where such Machinery involves considerable 
outlay, not only in Capital but in Fuel or Power, etc., this run- 
ning cost of the Machinery should be estimated and considered 
as so much Wages ; this is especially important where the 
Factory is divided into shops or departments, because one shop 
may use a large proportion of special machinery as compared 
with another. 

On the other hand, some Manufacturers contend that to 
apportion this expense on the basis of Wages is unreliable, and 
say that ,t should be charged to the machines in use. The total 
cost of the Workshop or Factory expense is then divided 
amongst the machines in use. This has to be fixed bv the 
Manager, and in proportion to the time each machine is empioved 
on any job so is the job charged. 

This system may, and would, no doubt, work well where -dl 
the machines were steadily and regularly employed, and thele 



r. 



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34 



manufacturers' accounts. 



charges could be adjusted from time to time as required, but 
the weak point seems to be, that when machines are lying idle, 
that certain machines would be overtaxed with their charges. 
As we have repeatedly said, this is one of the most difficult 
matters to settle, and each Manufacturer must decide for himself 
as to the best method for his particular industry. 

On the Labor basis, allowing a special charge for special 
labor saving machines, it seems to us that a more uniform result 
will be obtained. 

There has been so much written on this subject, both from 
the Manufacturers' opinion and the academic point of view, that 
the Authors have thought it best to simply here give what is 
conceived to be the most reliable method for general use. 
Circumstances alter cases, and the individual experience of any 
criven factory may demonstrate that some other course is 
advisable, nav necessary. For example, in the case of a foundry, 
or broadly speaking, Factories under Class 2, the rule may not 
always apply. Here the quantity of the product is obtamed ; 
ihe cost of the same, and the amount of Wages expended for 
the given period. The whole expenses for the foundry for the 
time in question are then averaged, and with the other items 
above mentioned constitute the value of the metal or material, 
which is capable of then being priced at so much per lb. or other 
quantity. The distributing expenses can then be provided for. 

Cost Ledger. For Factories, More Especially 

Under Class L 

This is the most important book in Cost .Accounts. As the 
I edger focuses all the numerous transactions in connection 
with anv person or account, so does the Cost Ledger focus all 



SPECIAL BOOKS USED IN COST ACCOUNTS, ETC. 



35 



the various costs and charges in connection with any job, article 
or series of articles. One thing must be clearly understood, and 
that is this, that while the Commercial Ledger is a permanent 
record of transactions and remains in statu quo, on the other 
hand the " Cost Ledger " has done its work when the job is 
completed, and, as soon as convenient, the account referred to 
is removed. A little consideration will clearly demonstrate this, 
for the " Cost Ledger " gives us the details of the "Cost Ledger 
Account," which is a General Ledger Account. Now, when 
the g-oods are transferred to Manufactured Stock Account, 
simultaneously the corresponding Cost Ledger Accounts are 
closed. The book-keeper will understand this clearly by the 
Journal entry. 

Manufactured Stock. Dr. 

To Cost Ledger Account 
as detailed 

The Cost Ledger should be divided into two parts : 

(i) Orders or Jobs. 

(2) Factory or Workshop Expenses. 

The ruling of sheets in part (1) Orders or Jobs, is shown as 
follows, Fig, No. 10. 

This form clearly explains itself, and the information required 
is obtained and posted from the vouchers as shewn in the 
chapters on Material and Wages : — 



>',.- 



36 



MANUFACTURERS ACCOUNTS. 



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SPECIAL BOOKS USED IN COST ACCOUNTS, ETC. 37 



ir 



The ruling for Part 2 Workshop Expenses is shewn as 
follows: — 

Fig. No. II. 

COST LEDGER FORM. 
Factory or Workshop Expenses 



Date 



Particulars 



Fo. 




Stores 

of 
Material 



It will be noticed some of the columns have no heading 
this provides for details as required, and differing in accordance 
with the nature of the Factory or Workshop. As mentioned 
before, all the accounts in "Part i Orders and Jobs," are closed 
when completed. 



/u 



38 



manufacturers' accounts. 



The voucher system can be well adapted for Cost Ledger 
Accounts, or perhaps better still a loose Leaf Ledger. When 
the order is started a sheet printed Cost Ledger, and ruled as 
shewn in Fig. No. lo, is headed with the order number and 
name, and placed on file for ''Orders in course of Manufacture," 
when the job is finished the account should be stamped as 
follows, with a rubber stamp : 

Fig. No. 12. 



Datk 



Enteie<l by . 

Order Book ) 
Folio j 



Summary : 

LaVxjr. 

Material 

Direct Exs 

Factory Exs. Estimated 

Prime Cost 

General Expenses Estimated. 

Total Cost 



The details here outlined are to be carefully filled in. The 
amounts of Wages and Materials are obtained by ruling off and 
adding up the account itself, and the Estimated Expenses are 
obtained as previously shewn. The sheet, if kept on a Voucher 
System, is then transferred to file and marked " Orders com- 
pleted but not entered in Summary Book." These accounts 
can be ruled for debits and credits, but the forms shewn are 
much simpler and answer all the purposes. The fact of stamp- 
ing the account corresponds in book-keeping with the credit 
entry, and the transferring same to the second file is keeping 



SPECIAL BOOKS USED IN COST ACCOUNTS, ETC. 



39 



them in suspence to enable the entries for all jobs completed, at 
end of week or month, to be made in one book-keeping entry as 
is explained in another place. 

As regards Part 2 of the Costs Ledger Accounts, viz., 
Factory Expenses. These accounts are only closed yearly, or at 
the end of the financial period, but the Ledger itself is balanced 
monthly and verified with the balance at Cost Ledger Account 
in the General Ledger, with which, after the completed jobs 
have been taken out and the book-keeping entries passed, the 
total balance of the Cost Ledger must agree, if all the work 
has been correctly posted and recorded. 

The transactions in the Cost Ledger as here referred to are 
those especially of a manufactory where it is necessary to know 
the individual cost of articles. As before stated it is not always 
practicable, if possible, to follow this cost right through. When 
this cannot be done the records are kept of the processes, and a 
practical illustration of this is given in a later chapter, or only 
partial records are kept as a matter merely of record. 

The difficulty of keeping and closing the Cost Ledger 
Account in the General Ledger is not such a complicated matter 
as might appear, as the jobs which are finished at any given 
date, weekly or monthly, are transferred to the Summary 
Register. 

ORDER BOOK. 

This book is used for orders received from customers, also it 
should be used for any work (or even repairs) order given by 
the management^ so that the cost thereof may be properly re- 
corded. A simple form is shewn in Fig, No. 13, but each 
Factory usually has some form or forms of its own peculiarly 
adapted to its wants. 



IK * 



40 



MANUFACTURERS ACCOUNTS. 



SPECIAL BOOKS USED IN COST ACCOUNTS, ETC. 



41 



As each order is received it is duly entered and properly 
numbered. While we refer to this as the "Order Book," and it 
is here shewn in the illustration in book form, yet we consider 
that in Cost Accounts the system known as the "Voucher 
System" already referred to can be very profitable employed. 
In the Voucher System then the order would be entered on a 
voucher in duplicate, properly numbered, and then one copy 
placed on file for " Orders accepted and in course of Manu- 
facture;" when the order is completed it would be filed away 
with the record ot its cost, which will bear the same number. 
This refers to P'actories Class i. 



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manufacturers' accounts. 



This •' Order Book," for a book after all is only a collection 
of sheets, should contain all necessary instructions and the 
fullest particulars compatible with time and space at command, 
as the Foreman of the Workshops and the Management will 
constantly require to refer to it. For future reference it will be 
most useful if properly kept and indexed. 

Most factories would find it valuable to index all jobs— 
not of the names of persons, because the Commercial Books 
must perforce do that, but the jobs themselves, classifying- them 
as to their class and the parts thereof if necessary. When 
estimates are being prepared there is nothing so satisfactory or 
reliable as to be able to refer to a similar job and see, not the 
estimated cost, but the real cost. 

Probably the hardest or most difficult work in the factory is 
fixing this estimated cost. Unfortunately in too many factories 
there is no attempt to verify this by the actual cost from proper 
records kept regularly. 

Where it is practicable all estimates should be made by 
different persons, and the results compared, as many a factory 
has been ruined from a uniform practice of tendering too low 
or having too manv " leaders." 



stm 



SPECIAL BOOKS USED IX COST ACCOUNTS, ETC. 



43 



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^•^ MAXUFACTURKKS ACCOUNTS. 

THE SUMMARY REGISTER. 

This book is ruled as shewn in Fig. No. 14 and the details 

are entered in their proper columns. As each account is 

entered in this register, care must be taken that it is duly ruled 

.off and stamped, or placed on separate file, as before provided 

for in Fig-. No. 12. 

In dealing with processes the result of the work done is also 
summarised, -viz., the value of the Material used, the Wages 
and Expenses. 

It is now very clear that by adding together columns Nos. 
r to 4 we obtain the prime cost of all the goods manufactured 
in the week or month, although for Processes it is only 
averaged, and can thus easily compute or ascertain the Gross 
Profit. This Gross Profit can then be compared with the 
Selling Price or prime cost of the goods manufactured to 
ascertain its percentage thereto — this percentage thus computed 
can then be compared with the "normal" percentage of the 
factory between the same items, as shewn in the Trading 
Account. 

Further the estimated expenses from this summary should, 
as far as possible, be compared with the actual expenses for the 
period as an interim check on the estimated allowances made. 
It will be noted that where Processes only are being followed, 
that the actual Factory Expenses for each shop or department 
are thereto charged. It is not required to estimate these as we 
do not necessarily follow the cost of each article. 

Where, however, it does become necessary, the proportion 
would have to be charged on the cost of the productive wages 
as before shewn. This would principally be necessary when 
valuing and making up inventory of partly manufactured stock. 



I 



I? 



SPECIAL BOOKS USED IX COST ACCOUNTS, ETC. 45 

Having added up this Summary Register it now affords 
some valuable information to the management, enabling them 
to form some idea of the business done to date and what it has 
cost. 

The next step then is to transfer these manufactured good*; 
to their proper accounts in the General Ledger The entry 
which will be made in the Journal is as follows : — 



Manufactured Stock 



Dr. 



To Cost Ledger Account. 
Wages, 
Material, 

F'actory Expenses (Estimated or otherwise). 
Direct Expenses, 

After these items have been posted in the General Ledger it 
is clear that the remaining accounts in the Cost Ledger should 
balance with the Cost Ledger Account, and that the total of 
Wages charged in the Cost Ledger to the Unfinished Jobs, and 
the Factory Expense Accounts should agree with the balance 
of the Wages columns in the Cost Ledger Account — similarly 
the " Material" and " Direct Expenses" can be balanced and 
checked. 

At the close of the Financial Period when taking stock it 
becomes necessary to know the value of the partly manufactured 
stock. 

The Wages and Material have presumably been charged to 
their respective jobs — to each unfinished job charge its propor- 
tion of Workshop Expenses. The summary of these items will 
give the value of the unfinished goods which should be 



46 



MANUFACTURERS ACCOUNTS. 



i 



journalised to credit of the Cost Ledg"er Account and afterwards 
brought down as a debit balance. The Factory Expenses 
referred to as Part 2 in the Cost Ledger will then be ruled off, 
and closed through the Summary Register. 

The Factory Expenses will then shew 

ist — Wages (Unproductive). 
2nd — Sundry Expenses. 

Now debit Factory Expenses column in General Ledger 
Account and credit Wages column with the amount of the 
Wages. It will be noted that in Part 2 of the Cost Ledger 
there are no estimated amounts to be considered. 

What is now the state of the Cost Ledger Account ? There 
is a debit balance at Wages column or account, but if the 
entries have been properly passed this balance will form part of 
the goods partly manufactured. This same applies to the 
Material column and the Direct Expenses column. 

We have remaining on the debit side of the account the 
summary of all the Workshop Expenses, as to this column 
have been charged, or should have been, all the expenses in- 
curred during the Financial period. 

On the credit side we have a summary of these same ex- 
penses " as estimated." These columns must be made to bal- 
ance by a journal entry to the debit or credit of Manufactured 
Stock Account. A little consideration will shew that if this 
Estimated Column is too high too much has been charged to 
" Manufactured Stock" and vice versa. 

Further, by noting the difference between these two columns 
or accounts a guide for future estimating or fixing percentage 



SPECIAL BOOKS USED IN COST ACCOUNTS, ETC. 



47 




of Factory Expenses with wages is obtained unless this differ- 
ence has been caused by an increase in the business done, or by 
a falling off thereof, 

A fact well worthy of noting in manufacturing is this : that 
while on the one hand it is safe to estimate your expenses high, 
yet the fear of estimating them too low may lose a contract 

when forming the Estimate. 

It is further to be observed that only the Prime Cost of the 
Manufactured Stock as in the system here shewn is carried into 
the Commercial Books ; but provision for estimating the total 
cost periodically is provided for in the Summary Register. 

These items can be summarised, viz.: the estimated Dis- 
tributing expenses or expenses of Management, at the end of 
the financial period, and referred and compared with the ex- 
penses shewn in the Profit and Loss Account, to see how far 
the Estimates tallied with them. 

The method of keeping the Cost Ledger and balancing has 
been here outlined. Each factory may, and probably will re- 
quire some special system, although the main principles can be 
discerned running through the '' special system " adopted. 

We have attempted right through to explain the different 
forms, when required, for Factories under classes i and 2 
respectively. 

The objection is sometimes made that it is not worth while 
going to the trouble of arriving at the cost of certain goods 
manufactured, as the selling price is usually fixed by the Trade. 
One answer to this would seem to be, that admitting that sell- 
ing prices are thus largely regulated, it is most important for 
the Manufacturer to know which lines pay him best, so as to 



48 



MANUFACTURERS' ACCOUNTS. 



fi 



know which lines to push the sale of, etc., and further, if he 
finds he is losing money, or making- too little on one line, he 
can study that line especially with a view to ascertaining 
whether the cost of making it cannot be reduced, by cheapening 
it somewhere, or by improved machinery, etc. 

Depend upon it the Manufacturer wants to know everything 
he can, and the more this information can be systematised for 
him the better for his success. 



RESUME OF CHAPTER. 



E f 



Factories Under Class i. 

Material charged to Material Account or Stores or 
Material charged direct to Job, and posted to Cost 
Ledger Account. 

Wages, Charged to Cost Ledger Account. 

Productive Wages, charged direct to Job in Cost Ledger. 
Unproductive Wages, charged to Factory Exp. or Dept. 
in Cost Ledger. 

Factory Expenses, Estimated as % on Wages charged 
to Job in Cost Ledger. 

Factories Under Class 2. 

Material charged to Stores or Department. 

Wages charged to Department. 

Factory Expenses charged to Department. 

Summary Book, provides medium for Collecting Costs and 
charging same to Manufactured Goods Account. 



. 



CHAPTER IV. 



WAGES. 



The importance of keeping a proper record'of Wages needs, 
or should need, little argument, when one considers what an 
enormous sum in comparison with other cost of manufacturing 
is annually expended on this item of the prime cost. In some 
manufactories, indeed, the item of Wages is heavier than the 
outlay on the material incurred in manufacturing. 

It is not attempted in this book to describe all the various 
systems of keeping track of attendance or records of work done, 
as there are so many good ones suitable in accordance with the 
number of hands employed. Moreover, while of necessity 
various forms are shewn in suggesting methods to adopt, yet 
this book professes more to deal with the principles suggested, 
as leading up to a more perfect system of keeping accounts. 

It is comparatively easy to keep records shewing how much 
each workman has earned during the fortnight, and how much 
has to be paid. But in addition to this information the Manu- 
facturer wants to know that he has his '' quid pro quo " in the 
shape of value received for the cash he has thus expended. 

Wages may be divided into two main classes : 
(i) Productive Wages, Time work, 

Piece work. 
(2) Workshop expense, or Unproductive Wages. 

4 L 40 ] 



50 



manufacturers' accounts. 



It will be noted this division follows out the plan observed 
in the two parts of the Cost Ledger. 

When it is possible to have the work done on the piece work 
principle it is usually and truly considered the better plan. 
Admittedly it is better both for the master and man, but it re- 
quires carefully watching to see that a tair and reasonable wage 
is thus paid. Some Manufacturers fanc> that because the work 
is so paid for that it requires no check, but, on the contrary, 
experience shews that the quantities paid for require to be 
carefully compared and checked with the work ordered. 

The register of Wages from which the pay sheet is prepared 
should separate the names into groups or classes in accordance, 
as far as possible, with the various shops or processes involved 
in the work done. 

In the Factory Cost Account only one column is provided 
for Wages, but it becomes a very simple matter to keep a book 
summarizing monthly this account with its subdivisions as 
required. 

As a general rule keep a summary book for details and 
department'^s instead of filling up your General Ledger with an 
unnecessary number of accounts which entail also a lot of extra 
columns in the Cash Book, etc. 

When the cheque is drawn for Wages fill up in the stub the 
amount for each department and the amount of cheque will be 
the total. 

This may seem a small matter to refer to, but first-class book- 
keeping consists of bringing into as few headings or accounts 
as possible the multitudinous transactions of a business, and yet 
providing for as many detailed particulars being kept for 



WAGES. 



51 



Statistical and other purposes, without involving the book- 
keeping staff" in a lot of extra work. With only a few accounts 
in the General Ledger, the more quickly will the monthly trial 
balance be taken out, and the summaries themselves, as referred 
to, help to check the correctness of the accounts kept. 

The next step to be observed is that a proper record is kept 
of the work done by each workman. Forms of keeping this 
record are shewn in Figs. Nos. 15, 16, 17 and 18. This especially 
refers to factories coming under Class i. 



52 



manufacturers' accounts 



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54 



Fig. No. 17. 



manufacturers' accounts. 



DAILY WAGES SHKET. 
Form to be used when Time is broken and Short Times worked on each 



job. 



N.^ME 



No, 



Date, 



Time 



7 30 

7 45 

8 00 
8. 15 



8 30 

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9 00 
9 15 


9 30 

9 45 

10 00 

10 15 



Order 
No. 



PARTICULARS 



No. of 
Hours 



10 30 

10 45 

11 00 
11 15 

11 30 

11 45 

1 00 

115 



Per 

Hour 



Amount 



1.30 
1 45 
2.00 
2.15 


2 30 



2. 45 
300 
3.15 



S.30 
3.46 
4.60 
4.15 



430 
4.46 

5 00 
5.15 



530 
545 



WAGES. 



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.56 



manufacturers' accounts. 



WAGES. 



57 



The nature of the work to be done decides the most useful 
form to use. Form ¥\^. No. 17 is especially useful when it is 
required to keep a record of short times employed on jobs— this 
time is not kept record of in the Cost Ledger in quarters of an 
hour, but in dollars and cents. 

It has been recommended that a record be kept of every 
workman's time, this especially applies to a job which bears its 
proper number in Order Book. The job itself may consist of 
one article, as a machine, or a series of similar articles. Where, 
however, it is only practicable to keep track of the various 
processes entailed in turning out a quantity of merchandise, 
as for example in factories coming under Class 2, such quantity 
being carefully recorded at given periods or as completed, a 
simpler method can advantageously be employed. In this case 
each process is usually carried on in its own particular work- 
shop, supervised necessarily by the foreman. Fig. No. 19 will 
shew how the labor expended on each process can be system- 
atically recorded. 

In this form all the names of the workmen employed iu the 
shops are entered and a record is kept of the hours expended 
daily on the particular process or, as is more often done, simply 
of the days. 

It often, however, happens that though a man is regulars- 
employed in one shop that his services are required in another 
department. Should this occur his own foreman can record the 
time thus employed on the record sheet on which his name 
regularly appears. To enable this to be done each shop should 
bear a distinguishing number or letter, and the time marked 
with the letter following it in the square opposite his name and 
under the proper date. At the end of the week or fortnight the 



i 



i 



I 



I 



work done outside the shop can be charged to the shop using 
the workman's services. A little arrangement between the fore- 
men readily enables these times to be correctly recorded. 

When the Wages are paid the number of hours worked by 
each workman, or the number of days, as the case may be. 
should be summarised and compared with the Pay Sheets, 
which, as before mentioned, should be divided into the shops 
or arranged as the nature of the factory may suggest. 

It does not, however, follow that this system of checking 
the Wages Sheet can be applied on the day the Wages are paid, 
but it should be applied a^ soon thereafter as possible. 



t 



58 



MANUFACTURERS ACCOUNTS. 



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WAGES. 



59 



f|i» 



There are several points which want to be carefully noted 
with regards to piece work, but as this is a matter of experience 
as to fixing values which can only be regulated by the Manu- 
facturer himself, we shall content ourselves with one or two 
comments thereon. Firstly, then, it is very wise to keep a 
record of the hours worked on piece work, from time to time, 
first in one department and then in another, and thus ascertain 
what the work is costing per hour. This is provided for in 
Fig. No. 1 6. 

Again, it often happens that too high a price is being paid 
for the work, and that some of the workmen are purposely 
working slowly or even shorter hours so that this will not be 
noticed. 

Where some of the hands are highly skilled and others 
inferior, there is a tendency for the smarter ones to regulate 
their output by the work done by the slower ones. These are 
matters that want watching, and the experienced Manufacturer 
will probably realize this only too well. It seems hardly 
necessary to say that a highly skilled laborer should be 
encouraged to earn good wages, and that it would manifestly 
be unfair to gauge the price paid by such a man's earnings. 

These records of the labor employed on each job or process 
should be regularly posted into the Cost Ledger, similarly with 
the labor employed which comes under the heading of Factory 
Expenses. In doing this the items can first be summarized if 
necessary. In the Chapter on the Cost Ledger it is explained 
how the accounts in this Ledger are closed into the General 
Ledger. 

It is hardly possible, without specializing too much, to 
provide forms for all classes of factories ; our endeavor is to 



ESEBSSHBfl 



!l 



(iO 



MANUFACTURERS ACCOUNTS. 



enunciate certain principles which by certain modifications can 
be applied and used in all Cost Accounts. 

We cannot close this chapter without referring to the 
premium plan of paying Wages. The system is this : Presum- 
ing that a workman working on a given machine can turn out 
loo articles per day of ten hours, and such a turn out is consid- 
ered a fair day's work, and the wages are 20 cents per hour, 
the arrangement is made with him that the profit for all over 
100 he can turn out will be divided with him. Thus 100 pieces 
made in 10 hours = 2c. each ; if he makes 150 pieces the Manu- 
facturer has received 50 pieces more than he would under 
ordinary circumstances, and pays him for 25 pieces at 2c., or 
50c. per day, or $2.50 per day for that day instead of $2.00. 



II 



CHAPTER V, 



MATERIAL. 

Under this heading we have to consider how to keep a 
proper record of all Material and Stores. The quantity that 

comes in and its cost, then the quantity used in Manufacturing 

and on account of Factory Expenses, so that at any time we 

can readily ascertain the quantity on hand, and further, the 

quantity used in partly manufactured goods. In all large 

factories it is customary to employ a storekeeper, whose duty it 

is to look after all valuable stores. 



While for the proper keeping of Cost Accounts, as indeed for 
all accounts, there is a good deal of detail work, yet there are 
times when common sense must be applied and economy con- 
sidered. Certain Material may be required to complete a small 
job, and yet according to the rules of the factory all Material 
must be ordered, and the vouchef- signed by a responsible party — 
in the illustration here given, to get the order signed, the fore- 
man might be too busy to do so, and the workman would have 
to wait. Common sense at once points out that it is poor 
economy to waste valuable time, which represents money, to 
save perhaps a small value in Material. So in recommending 
that all stores be under the charge of the storekeeper, it follows 
that this practice applies more to valuable stores and intrin- 
sically valuable Raw Material. In fact, the nature of the 
business must largely govern all regulations. If the Raw 

[ «1 I 



02 



manufacturers' accounts. 



Material consists of gold, a very different supervision ,s required 
than when the Raw Material consists of iron. Where the Raw 
Material is used in large quantities, there is always more or less 
a percentage of waste, and this percentage can be fa.rly arr.ved 
at by experience. 

The Storekeeper's Duties would consist of receiving all 
goods coming into the factory and verifying the same w.th the 
proper invoices, .^s the goods are received they are entered >n 
his Day Book, which may be compared with a Cash Book. 
Where such stores are very valuable, such as gold, precious 
stones, etc.. they would probably be under the direct charge of 
some principal. See Fig. No. 20. 

On the left-hand side of this book are entered all the goods 
received, and on the right-hand side are entered all the goods 
given out by him. 

f^.^ tU(- npressarv particulars under the 
The storekeeper enters the necessary \ja. 

proper headings, and from the entries made in this book the 
Stores Ledger and Cost Ledger are duly posted up. 

The Stores Ledger is simply a ledger wherein accounts are 
opened as required, keeping a record of the quantities rece.ved 
and given out. 

When goods are received the particular account is debited, 
and credited when goods are given out ; the balance shews the 
quantity on hand at any given date, subject to a percentage of 
waste as before referred to. 

This svstem of keeping track of Stores and Materials is very 
useful. U is generally found more advantageous to keep 



MATERIAL. 



63 



record by weight instead of quantities when practicable. 
An instance of this may be quoted with firewood. 

It used to be invariably the custom with Merchants to 
sell firewood by the cord and keep records by quantity. 

Experience shews those Merchants who adopt the system of 
recording quantities of firewood by weight that it is much 
better. The same could be illustrated in many ways. 



if ; ; 



. : I 

:' ! 



MATERIAL. 




I 



1 1 



(♦■: 



64 



manufacturers' accounts. 



65 



r 







The item "Stores," of course can be made as expansive as 
required ; it may consist of Merchandise and Raw Material, 
and further, it will also cover items which, when they are used, 
may be charg^ed to a Factory Expense Account. 

It is also usually the storekeeper's duty to take charg-e of 
valuable tools, which are kept check of, by the workman giving 
his receipt therefor — this receipt may consist of a token with 
his number thereon. 

By referring to the Cost Ledg-er Accounts, it will be seen 
that provision is made for charging- each job with the quantity 
and value of Material used in the manufacture thereof. In 
some cases, for instance in the manufacture of jewelry, which 
requires careful and highly skilled work, it is comparatively 
easy, though to record the time may be more difficult, but in 
other jobs it is often not so easy or advisable to attempt to do 
so. Supposing that the job consisted of a dozen planing 
machines— probably in a case like this the best plan would be 
to weigh or carefully estimate all the parts of one when 
finished, and then to charge the job with the Material in pro- 
portion to the number made. 

A further question then arises when Raw Material or 
Merchandise taken from the Stores comes largely into question, 
at what cost is to be put in ? Raw Material is subject to 
fluctuation during the year, and consequently if an attempt 
were made to earmark any particular " lot " and to follow it 
through into the manufactured goods, we should find that these 
goods were marked at different prices at different periods. 

This would for many reasons be unsatisfactory, and con- 
sequently the proper method is to fix the price of Raw Material 



« 



06 



MANUFACTURERS ACCOUNTS. 



i 



t 



from previous experience, at the time being- guided by the 
state of the market. If Raw Material should be sold direct at a 
profit, such profit must be recorded at the time of sale. 

Unquestionably the successful Manufacturer must know 
how to buy well, and always watch his Stores Ledger to see 
what goods want replacing or replenishing, and we find that 
Manufacturers as a general rule do not find it profitable to 
buy in too large quantities as it is difficult to obtain an advant- 
age corresponding to the outlay of cash and other risks 
incurred. 

It mav not be out of place here to observe that profits made 
by an increase in values of the Raw Material should not be 
taken into consideration until the sale is effected. Some 
Manufacturers seem to like to show a profit to the factory, by 
buying their goods from the factory at a certain figure instead 
of charging the goods to Manufactured Stock at what they 
cost, but we do not recommend this course as a practice. In 
dealing- with factories under Class 2, where iroods are turned out 
inlarge quantities and of oneclassas explained in the chapter on 
Wages, it is only practicable to obtain the cost of the various 
processes as a general rule. When each manufactured pro- 
duct is completed, a careful record must be kept of the quan- 
titv turned out, and its cost ascertained. By keeping records 
of the Raw Material coming in, the quantities used in the 
factory and the output, the component parts of the manufact- 
ured articles, viz : 

The Labor, 
The Material, 



The Factory E^xpenses, 
can readily be obtained. 



1 



MATERIAL. 



67 



In the Chapter on Special Books used, Forms of Purchase 
Journals were given. As was there mentioned (See pag-e No. 
17), Figr. No. 3 is for factories under class i, where all the 
Material as it comes into the factory is charged direct to the 
job for which it was ordered, under the account - Cost Ledger 
Account," and then entered in the Cost Ledger; or if only 
Stores it is charg-ed to - Stores Account" in the General Ledger 
and detailed in the Stores Ledger. 

Now for factories coming under heading Class 2, we do not 
charge the jobs with the Material direct, so we recommend 
Forms of Purchase Journal Figs. No 6 and 7. 

Fig. No. 6 provides for all the Material purchased being 
recorded. The total of the invoices will give the total value of 
the Material bought for the week or month. The totals of the 
sub-columns will give in addition the details of what the 
Materials consist of- the total quantity of each kind and cost- 
the average price per unit of each class can then readily be 
obtamed. Suppose Sugar is one kind of Material bought- it 
will be bought of various qualities. The addition of - Su-ar " 
columns will give total number of lbs. and cost, when ave'ra^e 
pnce per lb. can be obtained. As a general rule when tMs 
Sugar comes into the cost of a lot of goods manufactured it will 
be sufficient to value it at this average price, as just referred to. 

Fig. No. 7 provides a Journal for goods other than Raw 
Material and requires little explanation. 

Fig. No. 21 is a record shewing the quantities of -Material 
used in manufacturing." 

This information is obtained from daily or regular report 
sheets handed in by the foreman of each shop or department. 



1 



m 



68 



MANUFACTUREKS' ACCOUNTS. 



This daily report shows the quantity of goods manufactured, 
and the quantities of Raw Material used. The forms to be used 
must be prepared for the factory so as to be suitable, but they 
must be as simple as possible. In dealing with workmen, 
where you want information recorded by them, provided 
questions to be simply answered. But care has to be taken 
that the quantities used are not guessed at. The quantities 
manufactured or the output must be verified by the quantities 
received into the warehouse — 



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MATERIAL. 



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MANUFACTURERS ACCOUNTS. 






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MATERIAL. 



71 



Fig. No. 22 shewing "Goods Manufactured" is also entered 
from above daily reports. By carefully adding up quantities 
in these Journals and posting totals in the Stores Ledger the 
quantity on hand of any given kind of Material can be readily 
checked when processes are being recorded. 

There is a point here which is worthy of attention and it is 
this— It often happens that Material has been given out for a 
special job or process, whefn a ''rush order" comes along. The 
'foreman happens to be short of the Material required, but 
notices that it is similar to the Material used on a special job 
above mentioned, which job he stops for the time being, the 
Material being used for the "rush order."' Now care must be 
taken that the Material is changed to the "rush order" and 
the former order cancelled, or amount of Material diverted 
therefrom and deducted from the voucher recording same. 
Jobs are often twice thus charged with Material owing to 
changes being made after the vouchers had been filled out. 

Where parts are required or Stores wanted for any job or 
process, a voucher should always be made out for the same, to 
enable such Stores to be properly charged ; such voucher should 
when practicable, be signed by the foreman or other responsible 
officer, and it need hardly be mentioned that waste in Material 
is fatal to big profits. In some factories it is very often 
observable that Stores are left lying about and consequently 
later on are lost. Let the men be trained to consider that such 
Stores are not only a few nails or hammers or nuts, etc., but are 
dollars and cents lying about, and consequently want picking 
up and putting in their proper place. Again, it is very 
important to be able to see how your men are working. Take 
as an illustration the veneering of piano cases. By keeping a 
Jecord of your veneer you can ascertain the number of cases 



7*2 



manufacturers' accounts. 



lii 



turned out from a given quantity. Similarly with leather, 
cloth, cardboard, etc., unless close watch is kept there are 
workmen who will waste a large percentage of Material as 
compared with others. Records once established, as regards 
quantities used, are expected to be maintained. With Raw 
Material steadily increasing in price it follows that mure and 
more must the waste be curtailed. A few years ago a little 
more or less veneer or lumber used x^as not important, but it is 
different now. 

By the same reasoning our forefathers when manufacturing 
had large margins of profit to work on, and did not require to 
figure closely. 

Some Manufacturers of old standing seem opposed to 
keeping records and Cost Accounts, but they are apt to forget 
that probablv their success has been and is largely due to their 
own marked skill and individuality, and looking after all 
details themselves. 

Modern factories to be successful have to produce in such 
large quantities that the individual supervision in lieu of 
written records becomes too costly. It goes, of course, without 
saying, that the better the foreman is the better work and 
more profitable will his shop turn out. 

When each foreman knows what work his department turns 
out monthly and the costs thereof, it is an incentive to him, if 
he is a first-class man, to minimise waste in every direction. 

Now, "Time" is as important as Material, in that it must not 
be wasted, not only with time workers but piece workers. Care 
not onlv has to be taken that workers do not waste or idle their 
time ov4r the work given them, but that there is always work 
for them to do. 



! i 



material. 



7;^ 



A factory should always endeavor to keep all the hands 
employed busy. 

The following instance will shew how the keeping Cost 
Accounts acts upon foremen, and the illustration given is an 
actual fact : 

A price had been fixed for making certain articles, upon 
which a number of girls were working. At the end of the 
fortnight the management noticed that these girls had only a 
small amount coming to them. Enquiry was made and it was 
found that the price paid was fair enough, but that the girls 
had not sufficient work prepared for them. The management 
thereupon paid the girls what they considered a fair wage and 
charged it to the department, thus raising the Cost of the work 
actually done. The following fortnight there was no difficulty 
as the foreman had taken care that there was plenty of work 
given out. We know in a Newspaper Office the call there is at 
times for '* copy." 

In concluding this Chapter on Material, the Stores Ledger 
as recommended is admitted by most Manufacturers to be most 
useful, but too expensive a luxury. It is strange how men will 
pay their clerks salaries lo keep charge of their cash, but the 
Materials can lie round with no one in charge of them. If an 
Accountant w^ere to advise his client that it was unwise to leave 
large sums of money for everyone to take a few cents when he 
felt"" disposed he would be laughed at ; and yet when the 
Accountant urges the importance of exercising a similar vigil 
over Material and Stores he is met with the cry of - but the 
expense." The Merchant employs a lad to look after his petty 
cash and instructs a responsible clerk to carefully check all the 
lad's receipts and disbursements, and this is quite right, and yet 



HBLgjygB!" 



u 



74 



MANUFACTURERS' Al.'COUNTS. 



a man to look after all the Material and Stores used would cost 
as an expense little more. It would be interesting to note the 
comparative values of the two interests to the Manufacturer 
and the amounts to be saved or lost in each respective depart- 
ment. 

Depend upon it if the value of the Material was looked after 
item by item all through the year, as it is looked to in 
preparing Inventories for the Balance Sheet, when big assets 
are wanted to help the profits, these profits would be larger 
and not require such help as writing up the Stores as highly as 
possible when stock-taking, which is unfortunately too often 
done. 



%^^ 



CHAPTER VL 



FACTORY EXPENSES. 

FOR FACTORIES COMING UNDER CLASS I. 

In the last two Chapters we have dealt with two important 
factors in the prime cost, viz.. Wages and Material. The third 
factor is Workshop or Factory Expenses, and the object in this 
Chapter is to endeavor to explain how this item is to be dis- 
tributed or apportioned. Whether this cost has to be distributed 
on a bulk job or to an individual item the principle remains the 
same, and to enable any cost to be ascertained or any correct 
estimate made, some basis must be established which is as 
accurate as possible. If we consider the whole year's expenses 
there is little difficulty in establishing a percentage comparison 
with the amount of sales, the value of the Material employed 
therein or the Wages, but the difficulty arises in making use of 
the percentage in any single job, because we have to consider 
that the figures obtained at the end of the year shew the total 
result and any percentages obtained are only average ones, but 
none the less useful for purposes of comparison from year to 
year. 

Taking a single job upon which we wish to make an esti- 
mate, we have two known factors which we can, by our past 
experience and statistics recorded, obtain fairly accurately, viz., 

[75] 



1 ti 






76 



MANUFACTUKERS' ACCOUNTS. 



Wages and Material. We have to value this third factor, viz., 
Workshop Expenses. Certainly we can get the average per- 
centage from the yearly totals, and we have the choice of then 
taking the percentage on the Wages or Material, or on both 
combined. Let us first consider the result when taken from 
the Material. 

Supposing the sales for the period amount to $100,000; the 
Material $30,000; the Wages paid $40,000; the Factory 
Expenses $6,000, and the Gross Profit $24,000. 

Now the Factorv Expenses would be 6% of the Sales. 

20% of the Material. 
15% of the Wages. 

Taking the Expenses ratio upon the Material then in esti- 
mating one job -if the Material is valued at $100.00 the 
Expenses would be $20.00, or 20% on value of Material ; the 
Wages having been calculated at $80.00, the Prime Cost would 
then be $200.00. Now supposing the same job is being esti- 
mated upon, but with a more expensive Material, all the other 
conditions being the same, viz., requiring no more supervision 
or labor - say Material costing $2op.oo, then the Expenses would 
be $40.00, viz., 20% on value of Material and Labor $80.00- 
Prime Cost would then be $320.00, instead of merely shewing 
the $100.00 increase as it clearly should. It requires only a 
little reasoning to shew that the Material cannot be relied upon 
as a basis. 

We then come back to -Wages" as a basis. The question 
then arises, should we take the comparison from the number of 
hours worked or from the value paid. Unquestionably if we 
could uniformly employ the same class of labor and fixed a 



FACTORY EXPENSES. 



77 



standard, so that we could say the Wages for the year repre- 
sented so many standard hours, it would be the best, but as 
things are, with perhaps apprentices working on one job and 
high-class men on another, it is clear that such a basis would be 
untrue unless we took the apprentices' time as standard and 
called some men's time two hours for one of anothers, which 
would lead to endless complications. The only practicable way 
seems to be to take the value or cost of the Wages. 



Now, comparmg 
as a basis ; 



above illustrations, we find under Material 



Material 100.00 

Labor 80.00 

Factory \ 
Expenses I 



Material $200.00 
Labor 80.00 



20 00 



Factory ) 
Expenses I 



40.00 



Prime Cost $200.00 



Prime Cost $320.00 



Calculated, however, on what we consider the truer basis 
we have — 



Material $100.00 
Labor 80.00 



Factory ) 



12.00 



Expenses 
Prime Cost $192.00 



Material $200.00 

Labor 80.00 

Factory | ^^^^ 
Expenses j 

Prime Cost $292.00 



The increase in the Cost of the Material does not itself 
demand an increase in the proportion of Factory Expenses 
though it must be born in mind in considering the sellmg price, 
as naturallv some extra profit is looked for ; but what we are 
considering here are not the profits, but how to arrive at the 
Prime Cost. 



7H 



manufacturers' accounts. 



The fixing ot a percentage of what is to be charged to 
Wages is sometimes opposed by Manufacturers on the following 
trrounds : That selling prices of certain lines are fixed by com- 
petition or by the Trade generally, and that on these lines, 
which are usually cheap lines, they cannot charge the same 
proportion as on other lines which yield a good profit. 

Here is an illustration. A firm turns out a number of 
" troods" which are sold verv cheap— in fact, this line of goods 
is sold at the same low figure by the trade generally. 

What do these goods cost ? 

Material, 

Labor, 

F'actory Expenses. 

Now, it is contented that though the labor on these goods 
is cheap, that the Expenses must not be charged on it at the 
average rate, as the machinery employed represents only a 
small amount of Capital as compared with other goods manu- 
factured. Now, of course we admit that calculating the 
Expenses at so much per cent, on the labor we are only arriving 
at an estimated result, but just consider what it means if every 
machine employed in the factory has to be considered. What 
calculations would have to be made. Certainly it might be that 
in certain factories certain modifications have to be made as 
recrards special machinery, and it is very clear that each factory, 
if it wishes to establish a true basis upon which to fix this 
important charge - a basis so necessary to know when estimat- 
ing the cost of a given job -must carefully record these amounts 
so estimated, and see that their total agrees with the amounts 
actually expended at the end of any given period. See page 
No. 44. 



H 



FACTORY EXPENSES. 



79 



Now after all what is the position. The objection is usually 
only made when considering such lines as the cheap goods 
already referred to. Supposing after all that these goods must 
bear their share of the Expense, what are the facts if it is true 
that they cannot stand being charged w^ith Expenses. They 
must be summarized as follows : 

I St. That these lines are being sold at a loss. 

2nd. That possibly this loss is and might be charged to 

advertising. 
:;rd. That competition has fixed the price. 

It seems reasonable to think that if Manufacturers generally 
admitted that such cheap goods were being sold at a loss, that 
thev should meet together and establish some basis which 
would rectify what seems an absurdity. 

For one Manufacturer to sell a line at a low figure to get 
business is comprehensible, but when this becomes the trade 
price there is no advantage gained to anyone, but on the 
contrary all are losing money. 

Our object in making these remarks is to shew that, be- 
cause the Prime Cost as arrived at is actually more than the 
selling price of a particular article, it does not necessarily follow 
that the method of valuation is incorrect, but it may equally as 
well shew that that article is being sold too low, or in other 
words at a loss. 

Manufacturers should and always will compete for business, 
but some method also should be arrived at, so that goods need 
not be sold below Cost. 

The Management Expenses, or as they aresometimes called 
Fixed Charges, do not vary so much with the sales as do the 



80 



manufacturers' accounts. 



Workshop Expenses. There is usually, however, a minimum 
amount at which these Expenses can be maintained when the 
factory is running, and there requires necessarily a certain 
amount of sales to be made if profits are to be satisfactory. 

Theoretically the sales are based on the Cost, but in most 
cases there is a trade price or value which regulates the selling 
price. 

The ratio of Expenses decreases as the volume ofbusiness 
increases, and therefore when business is slack it is often more 
profitable to increase the sales at a small profit, for the sake of 
lowering or maintaining a proper ratio of Expenses on the 
business done. 

On much the same line ot argument do the departmental 
stores slaughter the remainder of a line of goods, when 
sufficient has been sold to retur-n a fair profit on the outlay or 
Cost. 

This is admittedly a most difficult question in Cost Accounts, 
viz., that of correctly distributing these Expenses. In some 
trades the method recommended would not apply at all, and 
the proper ratios to adopt would have to be ascertained by a 
series of experiments, and from the Cost Sheets themselves for 
a givirn period, until the proper average for the particular busi- 
ness has been ascertained. 

FOR FACTORIES COMING UNDER CLASS 2. 

Under this class there is little difficulty as all that has to be 
done is to charge these Expenses for the period being dealt with. 

Under the Chapters on Wages and Material, we saw how to 
find out the Wages paid and the Materials used for the period, so 
if we add to them the Expenses for the same period, we obtain 



FACTORY EXPENSES. 



81 



the Prime Cost of the " Goods Manufactured." It of course 
may be necessary to adjust and allow for partly manufactured 
goods, but for the purposes of the monthly statement, the actual 
output of goods completed will often suffice, as the average re- 
sults thus obtained would be sufficient guide and afford infor- 
mation which would shew the Manufacturer it the returns were 
satisfactory or not. 



ft 



PART II 



[83] 



/ 



i 



CHAPTER VIL 



COST ACCOUNTS FOR BOILER AND ENGINE MANU- 
FACTURERS AND CONTRACTING ENGINEERS. 



FACTORY COMING UNDER CLASS I. 

We have chosen in this Chapter the business of Manu- 
facturing Eng-ines, special Machinery and Boilers, as probably 
being better adapted for the purposes of illustration than some 
others. We are not attempting to present a full set of accounts, 
shewing both Commercial Ledger and Cost Ledger, with Trial 
Balance and Final Balance Sheet and Profit and Loss Account, 
as the space allotted will not admit of our going so fully into 
the accounts. 

We therefore will only take up the main, and what appear 
to us the most important books and Ledger Accounts, and 
endeavor to shew how they are affected by the various entries 
made, and also illustrate by them the application of the princi- 
ples laid down, and try to shew how easily they can be adapted 
to any manufactory coming under Class i. 

Some argue that a system of Cost Accounts means dis- 
arranging the present books, and general inconvenience all 
round while they are being introduced. That this is not so 

we will illustrate as follows : 

[ 85 ] 



P 



11 



I 



86 



MANUFACTURERS ACCOUNTS. 



Take Fig. No. 2^ as being the Balance Sheet of the Manu- 
facturer in question. 

INDUSTRIAL WORKS, TORONTO. 
J. AiNLEY, Proprietor. 
Balance Sheet, 31st December, 190 1. 

For convenience of reference each item on this Balance 
Sheet has been numbered, and we have also put in as few 
accounts as possible, and have assumed that the Manufacturer 
had plenty of capital and neither gave nor received promissory 
notes. 

The Balance Sheet shews the accounts as they would appear 
at the beginning of the trading and manufacturing period. As- 
suming, then, that this Manufacturer had hitherto kept no Cost 
Books and now desired to, the first step to be taken is to trans- 
fer to the Cost Ledger the unfinished Manufactured Stock- 
item No. 8 on Balance Sheet, detailed as follows : 

Labor $4,742.00 
Material 4,070.00 
Expense 1,188.00 



$10,000.00 



COST ACCOUNTS FOR BOILER MANUFACTURERS, ETC. 87 



Fig. No. 23. 



BALANCE SHEET 31st December, 1901. 



LIABILITIES. 

Creditors, on Open account 

' ' Wages due 

Revenue account, Provision for bad arid 

doubtful debts 

Thonias Ainley, Personal account 

" Capital account 



ASSETS. 

Cash on Hand, Pettv Cash 25 

Office. ; 1.50 

Bank 5,000 

Debtors, Open account.. 

Stores, Material all kinds, 

Partially Completed Work 

Finished Stock _ ] 

Freehold Und .'..."." ilis^OOO 

Buildings thereon 25 000 



1 
2 
3 



Plant and Machinery 

Patent Tubular Boiler, 5 years to ruiT 

Patterns and Drawings 

Office Furniture 



"),000 



6 

7 

8 

9 

12 

13 

14 

15 

16 

17 



5,175 
15,000 

8,000 
10,000 

1,000 



115,000 

5,000 

3,000 

500 



.$162,675 



14,000 

1,800 

300 

1,000 

145,575 



$162,675 



We will first open an account in our Commercial Ledger and 
call it -Cost Ledger Account," using the form shewn in 
Fig. No. 9. 

We will further assume that these jobs have been properly 
entered up in the Cost Ledger. We have not shewn these 
entries in detail, as it will be sufficient to follow one order right 
through as an example, and then show how the various books 
are closed, summarised and finally brought into the Financial 
Statement. 

The business carried on in establishments ot the kind we are 
about to discuss, is the building of Stationary and Marine 



■T 



■ i 

1 



88 



manufacturers' accounts. 



Steam Engines of all types, Steam Boilers of all kinds, and 
Machinery for any special purpose desired. Machinery of this 
kind, especially if of large size, is not kept ready in stock, but 
is usually built to order, in accordance with plans and speci- 
fications furnished by the buyer in some cases, in other cases 
they may be furnished by the engineering firm tendering for 
the building of the Machinery desired. 

We will then pass a Journal entry : 

Cost Ledger Account Dr. $10,000. 

Wages $4,742 
Material 4,070 
Expense 1,188 

To Cr. partially completed work $10,000 

In order to close the latter account as opened in the Manu- 
facturer's Ledger 

See Balance Sheet, Fig. No. 2^. 

The " Order" then we purpose to deal with is as follows:— 

Mr. J. Williams has ordered an Automatic Vertical 
Engine, 5x6, particulars of which are as under : 

Automatic Vertical Engine, 5x6, cylimler 5 in. diameter, 
6 inch stroke, cylinder lubricator, all oil cups and wrenches, 
governor and pulley fly wheel, completed as per specifica- 
tion No. X, 

• 

The next diagram, Fig. No. 24, will shew the order No. 260 
duly entered up in the Cost Ledger, it having been completed. 
Instead of following up the order step by step through the 
various shops, we have chosen to take it at this stage, and 
refer back to its component parts or costs sufficiently in detail 
to make the whole process clear. 



COST ACCOUNTS FOR BOILER MANUFACTURERS, ETC. 89 

Well, then, from the account before us we find that it is 
divided into three main parts, two of which. Labor and 
Material, are posted up from other sources, and a third part. 
Workshop Expenses, which is estimated upon the amount of 
the Cost of the Labor upon the job. 
Fig No. 24. 



I 






I 



90 



MANUFACTURERS ACCOUNTS. 



COST ACCOUNTS FOR BOILER MANUFACTURERS, ETC. 91 






\: 

i I 



Fig No 24. 



COST LEDGER Form. 



Order No. 260. Name J. Williams. Description Work 



!'Work-'l Class ^^ 
Date ; mail of ; Hours 



1902 

Jan'y 



9 



No. 



38 
41 
47 
64 
79 



Work 



F. 
H. 



2" 
2 
3 
1 
30 



Rate 



15 
9 

12i 
15 
20 



REMARKS 



Forward 



Suniniary Labor. 

Patterns. 70 hrs. 14.98 
Drawings 8-2 ". . 4.-29 
Lathe. .191 " .48.29 
Forging.. 29.^ " . 9.89 
Fitter. .91 '' .18.05 
Helper.. 75 " . «.96 

488^ ?i;i02.4fi 



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.30 




18 




37 




15 


6 


00 


102 


,46 








I 



|! 



; 



I 






COST LEDGER- Form - Continued. 



Date 



1902 
Jan'y 



PARTICULARS. 



Particulars. 



^'""^ tity 



Frames, Chest, Corner, 
Base, etc 

Fittings, Lubricators, etc. 

Bearings 

Wrought Iron Crank f 
Shaft \ 

Cor. Ro<l 



Nuts, Cap Screws 
Babbitt 



Cast 
Iron 
Brass 
Brass 
W. 
Iron 
Mac. 
Steel 
Cast 
Steel 



1026 

n 

88 

28 

3 



Price Fo. 



Material 



P.I 

2i 1 

15 : 

1 50 I 

n ' 

I 

12* ' 



SUMMARY. 

Labor .•?102 46 

Material .37 21 

Factory Expenses, at 25% on Wages 25 61 

Prime Cost 165 28 

Distributing Expenses, 3% on sellinir 

price, $225.00 T 6 75 



Total Cost 172 03 



23 03i 

5 98 
143 

132 

63| 

37 
445 



Direct 
Expen- 
ses 

$ c. 



37 21 






I 



:ii 



I 




o 

d 



92 












O 

o 



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manufacturers' accounts. 




COST accounts for boiler manufacturers, etc. 93 

Let us First Trace Back the " Labor. "—Fig No. 25 is 
a copy of James Wilson's Time Sheet No. 79, from the 5th 
January, 1902, to i8th January, 1902. We note from this sheet 
that during- this period he worked constantly on two jobs, 
No. 260 and No. 2S8, and therefore against these two jobs 
must his Labor, 30 hours, costing $6, and 90 hours, costing 
$18, be respectively charged. 

On referring to Fig. No. 24 Wilson's work will be seen 
duly charged to Order No. 260, being the last item posted to 
Labor, the other items having been duly posted from other 
workmen's sheets. 

If this order had been a heavy one, instead of posting the 
Labor direct from these workmen's sheets we should have first 
summarised them on forms, as shewn in F'ig. No. 18, and re- 
ferred to in a former Chapter. 

The reader will observe that Mr. Williams' Order is always 
referred to as No. 260. This should always be done, not only 
for convenience, but because it is not expedient that the em- 
ployees should know more than is necessary about the work 
they are engaged on. 

When all the charges against Labor are entered it is useful 
to summarise the details for future reference, and to shew that 
job is finished. This is done in the Cost Ledger Account. 
Again we refer you to Fig. No. 24. 

If it is desired to keep cost of the Machine and its parts, 
including patterns and drawings, they would be referred to as 
26op. 26od., 260/1, 260/2, 260/3, which would mean 26op., 
standing for No. 260, patterns and so on, and the numbers 
referring to each part of the Machine as numbered on the 



■^mSim 



1 



III 



94 



manufacturers' accounts. 



Working: Drawings. If the Machine is one not likelv to be made 
asrain this item, - Working Drawings," is charged to the cost 
of the Machine ; or if for Machinery that is likely to be dupli- 
cated, half cost goes to first Machine, and the other half cost is 
charged to patterns and drawings, and carried to the Balance 
Sheet as an asset subject to depreciation. 

Material.— Having shewn how the Labor has been re- 
corded against this Order No. 260, we will next see how the 
amount of $37.21, charged against Material, has been arrived at. 

First of all we will reiterate what has already been referred 
to in Chapter on Material, that all Material and Stores comin- 
tnto the factory must be carefully entered into the Purchase 
Journal. By reference then to Purchase Journal, Fig. No. 26, 
we shall see where any Material specially ordered for this job is 
entered, and we find there item $22.01 

It will be observed that Fig. No. 26 is a reproduction of 
Fig. No. 3 filled in to suit this particular business, though this 
form could be considerably changed, yet the principle main- 
tained, which is to so keep the accounts that all the items of 
cost, viz., the labor, the material and the expenses of produc- 
tion are duly charged to the articles manufactured. 

In most factories it is found convenient to sub-divide into 
departments or shops, and where this is the case a record must 
be kept of the work done in each department, so that the man- 
agement can exercise a proper supervision. In the General 
Ledger it is not necessary to keep notes of these departments, 
nor even in the Subsidiary books, such as the Cash Book or the 
Purchase Journal. Let us suppose then in this order No. 260, 
which we are looking into, that it has passed through several 






COST ACCOUNTS FOR BOILER MANUFACTURERS, ETC. 95 

shops. As regards the Prime Cost of this order it is not im- 
portant to know what shops it has passed through, and so we 
refer to the Cost Ledger Account for the information on this 
point, as is shewn in Fig. No. 24, page 89. The Summary 
Register shewn in Fig. No. 28 gives us the result of the work 
as a whole. The best way then of keeping the records of the 
departments is through a distributing book, the total columns 
being made to agree with amounts posted in the General Ledger 
Account, whether for Wages, Material or Expenses Referrhig 
back again to Fig. No. 26, the Purchase Journal, the items 
there entered are supposed to represent the transactions of this 
particular manufacturer for a period of six months, and although 
they are here given in totals, in actual practice they would be 
entered daily and each individual account credited with total of 
invoices bought. 

The item $1,737.65 credited to Stores issued is charged 
$1,624.65 to works in process and $113 to Factory Expenses, 
and is a simple Journal entry passed through this book for 
convenience. When Stores are bought, except specially ordered 
for some particular order, they are charged to Store Account, 
or some similar account as has been before explained; but when 
Stores are used on account of works m process and so recorded 
in Storekeepers' Journal, an Entry or Entries similar to one 
above are passed and Stores account duly credited. 



m 



96 



MANUFACTURERS ACCOUNTS. 



COST ACCOUNTS FOR BOILER MANUFACTURERS, ETC. [)7 



Fig. No. 26. 



N 



PURCHASE JOURNAL. 







1 

No. of 
Inv. 

1 
t 


NAME 


Folio 

i 

1 
1 


Credit 


Date 
Entered 

i 


Invoices 

i 
1 


Duty 

and 

Freight 


Stores 
Issued 


1902 
Jan'y 


8 ' 

i 


1 


A. B. & Co. 

Six months* 


1 

i 

1 
i 
1 

1 

j 


23 


1 
03 1 

1 

1 


1 
1 


1 

1 


1 








transactions 










! 






June 


30 

1 




shewn in total' 

Taken out of 
Stores 

1 


( 

i 








i 


1,737 


65 






t 


Purchases 

• 


1 
( 


7,900 


00 . 


1 800 


00 


( 








1 




1 


$7,923 


I 

1 

03 


$800 


00 

! 

1 


.«;i,737 6r) 

j 1 






1 

1 






Credited 
in proper 
Accounts. 


1 

Credited 
Account in 

General 
1 Account. 


Credited 

Stores 

Account 

in General 

Ledger. 

1 



PURCHASE JOURNAL.-C.«./„„,</. 




CHAHtiE 



Date of I^^scKiPTiON Acc'nt 



Inv 



oice 



A\D 



Quantities Ch'g'd 



to be Cost Ledger 



Works in Factory Stores 
Process Expenses 



1902J II 'I 

Jan'y 1 Frames 

I { Chest, Corner 
I Base etc., m 

Cast Iron, i! i 

102311)s@2ic No260 



(Tcneral 
Expenses. 



23 03 



Charged 
Sundry 
Accounts, 
Works in 
Process, etc. 



Do. Do. 

and other 
Accounts 



1,624 65 



113 00 



4,800i00 602100 i 3,20o|oO 



98 00 




Charged to 

Material 

accounts 

in Cost 

Ledger 

Account 

in (xeneral j 

Ledger. ' 



Charged 
Factory 
Exs. ■ 
in same 
Account. 



Charged 

Stores 

Account 

in (General 

Ledger. 



Charged 
General 
Expense 
Account. 

an<l 

detailed in 

Subsidiary 

Book. 



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COST ACCOUNTS FOR BOILER MANUFACTURERS, ETC. 99 

The other items are taken out of Stores and Stores Journal, 
Fig. 27 will show items referred to being- for Material used in 
Order No. 260. 

At the end of the month or week the total value of goods 
given out will be entered in Purchase Journal to the Credit of 
Stores and Debit of Cost Ledger Account, thus the items in 
Order No. 260 will pass through this Journal, but not in detail, 
as they are only there entered in detail when specially ordered 
and charged direct. Of course, when the Invoices are entered 
in this Journal care has to be taken that they are properly 
marked, and Invoices for goods or material thus specially 
ordered would not be entered by Storekeeper in his Journal, or 
if they were, would only be entered short as a record, as he is 
not charged with such materials, though they might pass 
through his hands. 

Where there is no Storekeeper, records of Stores should be 
kepc, and also a book shewing the Stores and Material to be 
charged to Cost Ledger Accounts and credited to Stores Account. 
These entries, it will be noted, are dependent of, though they 
are in harmony with the postings of the Commerial Books. 

Further, we have not shewn how the quantities, etc. used in 
this Machine have been arrived at. These are matters of detail 
which practical knowledge and the facts to be looked after will 
determine. 

The main points in regard to Material are to see that prices 
are correct, extensions correct, and also weights and quantities. 

As regards the Machine Shop, there is not much danger of 
Material charged to one account being used for another, as the 
principal Material is cast iron moulded to distinct patterns or 



100 



manufacturers' accounts. 



forms. But in the Boiler Shops, steel plates mi^ht be used on 
one that had been charged to another ; but a little watchfulness 
on the part of the foreman or clerk having- this in charge will 
probably keep this in check. 

Care must be exercised to see that more Material is not 
received by the foreman of any department than is really 
required for the Order No. to which it is charged. The effect 
of this is to probably cheapen the cost of some other article by 
the surplus being used on it, and not charged to it, as for instance 
say that loo lbs. of J^-inch round iron was charged to No. 85, 
and only 50 lbs. used leaving 50 lbs. and that this 50 lbs. was 
used in No. 105. The 100 lbs. having been charged to No. 85, 
and the 50 lbs. used on No. 105 not being charged to it, both 
will shew false cost. 



Difficulty may be experienced in charging goods from Stores 
that have been purchased at different times and at fluctuatine" 
prices. Jf there is much of this the best way usually is to take 
an average price tor the period of purchases. Say bar iron has 
been purchased for 6 months, and after examining invoices you 
determine that 25% of purchases were at $1.75 per 100 lbs. 50% 
at $2.00, 20% at $2.25 and 5% at $3.00. Then take 1,000 as a 
basis and figure as follows : 

250 lbs. at $1.75—$ 4.87 
500 *' '* 2.00 — 10.00 



200 


( ( 


( t 


^•-'5- 


4-50 


50 


i i 


ii 


3.00— 


1.50 



1,000 lbs. 



S20.87 



therefore, $2.08 per 100 lbs. 



COST ACCOUNTS FOR UOILER MANUFACTURERS, ETC. 101 

Turning again to Cost Ledger Account, Fig. No. 24, Order 
No. 260, we find the job completed, and costs thereof summarised 
at foot, shewing Cost of Manufacturing same to be $165.28. • 

Every order as it is completed is treated similarly. 

•At the end of each month all these completed orders are 
entered into the Monthly Summary Register. See Fig. No ,8 
which shows Order No. 260 duly entered therein. 



^JBs 



102 



MANUFACTURERS ACCOUNTS. 












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COST ACCOUNTS FOR BOILER MANUFACTURERS, ETC. 108 

The remaining figures in the Monthly Summary are entered 
in one amount, and are supposed to represent six months' work. 
In actual practice they would be entered separately. Similarly 
the other entries are posted in the books as six months' work. 

Now, to close this Monthly Summary and transfer amounts 
to the Commercial Books 

The addition of Columns 1-4 = Total of Column 5. 

Columns 6-10 are intended for the inspection of the 
Heads of the Firm, consequently this book should be written up 
by a confidential man. 

Assuming" this book to be added up, we pass the following^ 
entry through Journal : 

Manufactured Stock Dr. $22,956.98. 

To Cost Ledger Account, $22,956.98. 
as follows : 

Wages $10,703.65 

Material 9,276.54 

Direct Expenses 298.38 

Estimated P'actory Expenses 2,678.41 

« 

22,956.98 

Reference to the Cost Ledger Account in the General 
Ledger, Fig. No. 29, will shew these entries duly posted. 



il 



i 



i 



104 



Fig. No. 29. 



manufacturers' accounts. 



COST LEDGER ACCOUNT IN GENERAL LEDGER. 



Dr. 



8 



Date 


1 PARTICULARS 


i 


Factory 
Wages 


Material 

i 


Direct 
Expenses 


I 

Factory 
Expenses 

1 


; Total 


1901 






















1 


Dec. 


31 


! To Inventorv^- 


























Partlv Manu- 
























1902 
June 


30 


factured Orders 
1 " Totals for (5 

months, taken 
J from Purchas- 




4,742 


00 


4,070 


00 






1,188 


00 


KKOOO 


00 






er's Journal, 








6,447 


68 






715 


00 


7,162'fiS 






" Totals taKen 


1 


























from Cash 


1 


























Book, which is 




























not shown, as 






















> 






it does not 




























present any 


■ 
















1 










special features j 
" Wages ! 


i 


8,672 


90 






298 


38 




1 


8,971 


28 






(unproductive) 


























( 


chargefl to Fac- 
tory Expenses 
and credited ! 


















! 


1 








per contra, 






90 

1 




68 




38 

1 


1,211 


25 



25 


1,211! 


25 




$13,414 


$10,517 


$298 


$3,114 


$27,345 


21 


1902 


30 


To Inventorv — 








1 












June 
























Incompletetl 


























work, 




$l,i"K)0 


00 


$1,241 


14 






$375 


00 


$3,116 14 



f 



COST ACCOUNTS FOR BOILER MANUFACTURERS, ETC. 105 



COST LEDGER ACCOUNT IN GENERAL LEDGER. 

Contimied. 



a 



6 



Cr. 



Date PARTICULARS 



1902 \ 
June 130 j By Totals posted 

from Summary 

Book 



" Incompleted 
work 



o 



Wages 



" Factory 
Expense.' 



■• Manufactured 
Stock Account 



i Material 



10,703 



1,500 



1,211 



65 



00 



Esti- 
Direct mated Total 

I Expenses Expenses 



25 



9,276 54 



1,241 14 



298 



38 



2,678 41 22,9.16 98 



375100, 3,116 



60 



$13,414!90!!$10,517 68 .i;298 



14 



84 



1,211 2d 



60 84 



38| $3.114 25 



$27,345121 



106 



MANUFACTUREIIS' ACCOU NTS. 



I 



I 



The Balance at Cost Ledi^^er Account will now represent 
Partly Manufactured Machinery, and the Expense Accounts and 
the details thereof can be obtained from the Cost Ledger itself. 
The next step is to balance Expense .\ccount. (Vide remarks 
below.) 

We have now shewn the entries in the books as regards 
Cost Accounts for six months. The method has already been 
explained in Chapters II., III., IV., and we trust that read to- 
gether the principles as therein explained will now be quite clear. 

First-class and correct work demands efficient clerks, and 
it takes time when any new or even change of system is intro- 
duced before it runs smoothly. The results obtained, however, 
so fully justify the trouble that it is well worth while to insist 
on that accuracy in details, which Cost Accounts look for in 
every direction. 

Remarks ox '* Cost Account " i\ the General Ledger. — 
The Ledger Account is shewn ruled off and balanced as on 30th 
June, 1902. This balance is carried forward and explains itsef. 
(Vide Fig. No. 29.) 

A little study of this account will shew that it is merelv a 
collection of the various accounts entering into Costs, and 
brought together for the sake of convenience. The accounts 
could be kept separately if convenience required it. If the bus- 
iness were divided into departments, it might be better to keep 
a separate account for each heading, sub-divided into the various 
departments. In modern book-keeping, however, the principle 
of keeping these sub-divisions in subsidiary books is adopted 
with great advantage, instead of increasing the number of bal- 
ances in the General Ledirer. 



COST ACCOUNTS FOR BOILER MANUFACTURERS, ETC. 107 

The columns are numbered in this account simply for con- 
venience in referring to them in these " remarks." 

Column No. i. — Factory Wages. — To this account are 
charged all Wages productive and unproductive. The total of 
this column, less the balance at the beginning of the period, 
shews the actual amount paid for the six months under review. 
It is here noted that the heading Wages does not cover Salaries 
incurred as they are one of the Expenses of distribution. 

Column No. 5 —On the credit side shews how these Wages 
have to be distributed. The first entry, $10,703.65, is trans- 
ferred and charged to Manufactured Goods Account as previous- 
ly explained ; $1,500 is carried forward — both these items are 
productive Wages. The item $1,21 1.25 consists of unproduct- 
ive Wages; so it is transferred to Expenses. (Vide Column No. 
4.) This amount is obtained from Cost Ledger, Part 2, where 
the various Expense Accounts are kept, being posted from the 
Wages sheets. Should a workman be working partly at pro- 
ductive work and partly at unproductive the facts are duly re- 
corded. This Wages Account should balance if the Cost Ac- 
counts have been correctly kept and they can be balanced 
periodically. 

Column No. 2, Materl\l. — This taken in conjunction with 
No. 6 should now require no further explanation. 

Columns Nos. 3 and 7. Direct Expenses. — The debit 
entry, $298.38, is posted from the Cash Book, where it was en- 
tered under the heading *' Cost Ledger Account "—the credit 
entry is posted from the Summary Book totals. 

Columns 4 and 8. — "Factory Expenses" and "Esti- 
mated Expenses." -The debit entries constitute all the F'actory 
Expenses for the period and are posted in due course Irom the 



• 



108 



MANUFACTURERS ACCOUNTS. 



subsidiary books. The credit entry, $2,678.41 comes from the 
Summary Book and the entry, $375, is the amount of Expense 
estimated from the summary of incompleted work at date of 
balance. Now these last items are estimated — and if the es- 
timates had been exact the amount would equal the sum ex- 
pended on Factory Expenses. By reference to the debit side of 
the account we see, however, that the actual expenses amounted 
to $3,114.25, which includes the Estimated Expenses on the un- 
finished work. This amount, $3,114.25, exceeds the estimate 
by $60.84 which is therefore credited to this account to the debit 
of Trading Account. In our business we have charged 25% on 
Wages expended on the jobs — this 25% we have assumed to be 
a normal charge — as however it has proved a little too slow, it 
shews the work turned out has been less than the normal out- 
put. The student is again referred to Chapter 3 in which this 
subject is discussed as it is one of the most difficult to settle ; 
this is, to arrive at the true normal rate to be charged. 

We have now endeavored to explain how this account is 
closed into the various General Ledgers Accounts, which, being 
the usual accounts kept, require here no special further explan- 
ation. 



This business has, we admit, been treated in the most ele- 
mentary way ; but our whole endeavor in this book is to shew 
as clearly as possible the principles involved. By elaborating 
the entries, sub-dividing into shops or departments, and pre- 
senting a mass o( figures, the student would hardly, we think, 
have learnt more, but on the contrary would have found it most 
difficult to trace the entries through, and have probably lost 
sight of the system. 



ar^av* 



CHAPTER Vm. 



«t 



CHAPTER ON FACTORY, COMING UNDER CLASS 2. 
Example— Candy Maxifacturer. 

As we mentioned in an earlier Chapter, the object of Cost 
Accounts is not only to find out what the goods manufactured 
cost, but to keep a record of the Material used, the Work done 
and the Expenses incurred. So as a matter of fact even if the 
Manufacturer could not ascertain from these records what any 
particular job or particular process actually cost he would still 
be a great gainer. He would find that these records being kept 
would establish greater care, and better workmanship ; and the 
economy thus put in force would yield far more in lasting 
profits than neglecting the keeping of proper factory books and 
saving any present outlay in Cash, or, perchance, the Salary for 
an extra clerk. 

Following our usual practice, we will deal with the com- 
ponent parts separately. Let us first consider then Material. 

Fig. No. 6 gives the form of Material Journal recommended 
for Factories coming under Class 2. In this case we are pre- 
paring a set of books for a Candy Factory, and so we must 
adapt this form to our requirements. 

[ 109 ] 



110 



MANUFACTURERS ACCOUNTS. 



We must first then decide under how many and what 
headings we intend to divide our Raw Material. 

Let the following list represent our decision : 

Sugar 

Glucose 

Molasses 

Nuts 

Flavoring 

Chocolate 

Fruit 

Sundries. 

This list can of course be modified to suit the particular busi- 
ness, and further sub-divided if necessary 



CHAPTER ON FACTORY, COMING UNDER CLASS II. Ill 









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112 



M AN UFACTUllERS' ACCOUNTS. 



Fig. No. 30 will illustrate our Journal ready for use. We 
have not in this Chapter entered any figures, as the whole pro- 
cess can we think be more readily followed by studying the 
various forms presented with the explanations accompanying 
them. 

All Material purchased will be entered in this Journal and 
charged to a special account opened in the General Ledger, 
known as '' Material Account," to the debit of which the sum of 
the total Invoices is posted at the end of the month. 

The Cost Account book now to be opened is called the 
Material Ledger, and the summation of its balances will agree 
with the balance of debit of Material Account. 

First then have an inventory made out of all the Materials 
on hand, classifying it under the headings shewn above. This 
inventory should show the quantity of each kind and the value. 
Pass a Journal entry debiting •' Material Account " with the 
amount, and then in the Material Ledger debit each amount 
with its value, the sum of these balances will equal the balance 
at Material Account, and we shall thus make a. correct start. 
In addition, however, to these money values we have to post the 
quantities on hand. The Material Ledger will therefore not 
Only shew us that we have so many dollars worth of sugar, or 
glucose, or duts, etc., on hand, but will in addition tell us the 
quantity. Later on when the purchases are posted therein, and 
also the quantities used, we shall further be able to obtain this 
fuller information. Note here that it is only intended that 
monthly totals shall be posted into this Ledger, and the system 
provides for this, so that the work entailed is really not at all 
formidable. If the Materail is bought for cash, provide a 
" Material " column in Cash Book and open a '' Detail Book " 
for quantities and details after the form of Purchase Journal. 



CHAPTER ON FACTORY, COMING UNDER CLASS IF. 118 



^^Hf- 



The object of only keeping one account ''Material" in the 
General Ledger is to save work and to facilitate transfers there- 
from afterwards to Manuf^ictured Stock Account. 

Just a few remarks here re quantities. In some cases it is 
difficult to fix a convenient unit for such item as flavorings, 
essences, etc., but this is a matter that common sense must 
decide, and, if necessary, for these items omit quantities and 
only record values. It is a fact, however, that a little trouble 
will establish a weight basis on most apparently unsuitable 
articles -in the case of essences, it can be ascertained how many 
bottles go to the pound, etc., but this is a matter we cannot fix 
here and can only suggest. Suffice it to suppose then that all 
the invoices for the month have been entered in the Purchase 
Journal— that the persons from whom bought have been duly 
credited and the total charged to "Material" in General Ledger, 
and the monthly totals of details posted to the debits of their 
proper accounts in the Material Ledo-er. 

P''^^- 31 g"ives form of a Material Ledger Account. 



8 



114 



manufacturers' ACCor.NTS. 



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CHAPTER ON FACTORY, COMING UNDER CLASS II. 115 

Having- shewn how the Material purchased is dealt with we 
have to consider how we are going to record the quantities of 
of Material used ; and we frankly admit that this is not so easy 
a matter. 

In the former case we are dealing with the office book- 
keeping who is trained to exactness, used to keeping his books 
in balance. In the latter case we may have prejudices to over- 
come, workmen who prefer to have no records of their work 
kept, or of the Material used. Our experience, however, is that 
good workmen appreciate such records. Does not the fact of 
objections being made at once point out most strongly that 
these records are necessary. A cashier who uses cash foV his 
own purposes or is earless in his work objects to the auditors' 
visits, not so the man who has everything correct But directly 
we leave the office we must drop all columnar book-keeping 
and ask for what information we want in plain English, leaving 
a place for the answer, and plenty of room too. 

We will assume that our Candy Factory is divided into 
three departments: 

1. Fondant or Cream Dept. 

2. Chocolate <' 
3- General Candy << 

Our object now is to ascertain how much Material is used 
in each department and also the output. 

The foreman will receive his orders from the office as to 
special orders received, and the work done by this part of 
factory management we are not dealing with. 

Daily report slips are prepared, and the following forms, 
Fig-s. No. 2>2, ZZ and 34, will give a practical illustration as to 



? 



f 



lf 



116 



manufacturers' accounts. 



how we keep track of the quantities— before writing up these 
slips the information required can be detailed on sheets of paper. 
The important point is that the quantities used must be weighed 
or measured and not guessed at. To attain successful results 
constant care and watchfulness on the part of the management 
is required. These daily reports are sent down to the office, and 
should be entered on registers shewn in Fig. Nos. 21, 22 and 
35 and 36. 

It seems hardly necessary to state that the factory will be 
duly advised daily as to what special orders have to be filled, 
and also as to all work to be done. 



Fig. No. 32. 



DAILY REPORT SHEET. 
Fondant Room. 



FONDANT 

How many pounds made to-day ?. 

How much Sugar used ? 

How much Glucose used ? 

Etc., etc 



BON BON CREAM 

How many pounds made to-day ?. 

How much Sugar used ? 

Etc., etc 



DO VOL' KEgUIRE 

Sugar ? 

Glucose ? 

Etc., etc 



Sigfn name here 



Date 



Foreman 



CHAPTER ON FACTORY, COMING UNDER CLASS II. 117 



Fig. No. S'S. 



DAILY REPORT SHEET. 
Chocolate Room. 



How many pounds made to-day ? 
How many Cream Centres used ?. 

How many Almonds used ? 

How much Ginger used ? 

How much Fruit used ? 

How much Nuts used ? 

How many 5.1b. Boxes packed ? . . 



i 



DO YOL REQUIRE 

Chocolate ? . . 
Preserved Ginger ? 

Almonds ? 

Walnuts ? 

Cocoanut ? . . . . 



Sign name here 



Dat( 



Foreman 



Fig. No. 34. 

DAILY REPORT SHEET 
Boiling Room 

cream centres 

How many pounds made to-day ? 

How much Fondant used ? _ 

How much Flavoring ? 

TAFFEES 

How many pounds made to-day ? 

How much Sugar used ? 

How much Glucose used ? 

How much Nuts used ? . . . 



1 1 



i f:' 



I 
I 



I ^ 



118 



MANUFACTURERS ACCOUNTS. 



TABLETS 

How many pounds made to-day ?. . . . 

How mucb Sugar used ? 

How mucb Glucose used ? 

How many Bottles filled ? 

CARAMELS 

How many pounds made to-day ?. . . . 

How mucb Sugar used ? 

How mucb Glucose used ? 

How mucb Gelatine used ? 

How mucb Flavoring used ? 

How mucb Cbocolate used ? . . 

How mucb Nuts used ? 

How many Tubs filled ? 

How many Boxes filled ? 

WALNUT PUDDING 

How many pounds made to-day ? . . . . 

How many Fondant used ? 

How mucb Nuts used ? 

BON EONS 

How many pounds made to-day ?. . . . 
How mucb Bon Bon Cream used ?. . . 
How mucb Cream Centres used ? . . . 
How mucb Nuts used ? 

MOLASSES KISSES 

How many pounds made to-day ? . . . . 
How mucb Molasses used ? 



How mucb Sugar used ? 



BUTTER SCOTCH 

How rnany pounds made to-day? 

How mucb Sugar used ? 

How mucb Glucose used ? 

How mucb Butter used ? 

State wbat materials require to be ordered 



Sign name bere 



Date. 



<• 

I 



Foreman 



00 

6 
6 



CHAPTER ON FACTORY, COMING UNDER CLASS II 119 





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120 



MANLFACrUREKs' ACCOUNTS. 



CHAPTER ON FACTORY, COMING UNDER CLASS II. 121 






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At the end of the month then, by adding- up the columns, we 
have the quantities of Material used for that period. It might 
be noted also that we have so many lbs. of Fondant used- by 
turning up the Goods Manufactured reg-ister we find so many 
lbs. of Fondant made— thus we can check the quantity of 
Fondant on hand. 

We have now to arrive at the value of the Raw Material 

used. We averag-e the price paid for the Sugar, Nuts, etc., and 

prepare a summary as follows, not considering the Fondant at 
present : 

$ c. 

lbs. Sugar (r/ per lb 

- " Chocolate (7/ per lb... . 

etc., etc., etc. 



We then prepare a sumiriary of the Goods Manufactured 

follows, taking the selling price : 

$ c. 
lbs. Chocolates, Class i, (a 



as 



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(( 



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2, (n 

etc., {(f 



— *' Candies . . . 
(Classifying them) 



This summary will agree, if the records have been properly 
kept, with the goods received into the factory warehouse from 
the factory, or in other words, the output. However small or 
large a factory is, when goods are handed over as finished a 
receipt should be given from the Warehouse or Shipping Clerk. 
These receipts provide a means of checking errors, etc. 



122 



manufacturers' accounts. 



''\ 



I 4 



i I 



We now know at the end of the month : 
Quantity and Value of Materials bought. 

used, 
on hand. 
** and Selling- Value of Goods Manufactured. 

The next step to be provided for is the labor, and that is 
comparatively simple. Fig. No. 19 gives a form which will meet 
our requirements, and it will be noted that all we provide for is 
a record of the Wages for the month, and we do not attempt to 
locate them to each order filled, as is necessary in factories 
under Class i. 

The next point is the expense of productiou, and that is 
simple, as it is only ascertaining what the expenses are in each 
department for the month. A simple estimate can be made so 
as to include items which are not paid each month. 

We now can collect together all the component parts making 
up the cost of the output for the month. 

These particulars are duly entered up in the Summary 
Register. See Fig. No. 28. 

This statement is not exactly correct, but made up monthly 
will be approximately correct. Where is the discrepancy then ? 
It is this : We charge up actual outlay for Wages and Expense 
for the month, but part of these should be strictly charged to the 
goods partly manufactured and outstanding at the end of the 
month. But this will average itself up month by month, and in 
our opinion need not be considered. 

From this monthly summary a fair estimate can be formed 
of the gross profits made, or by adding up the costs of distri- 
bution of the net profits. 



i 



CHAPTER ON FACTORY, COMING UNDER CLASS 11. 123 

The Journal entry to be passed through the books is as 
follows : 

Manufactured Goods Dr $ 

To Wages $ 

To Factory Expenses 

To Material Gost Account 

As follows : 



Sugar 



Ghocolate . . . 

Nuts 

Etc., etc., 



etc. 



$ 




The details of the Materials used will then be posted to the 
credit of their proper accounts in the Material Ledger, so as to 
keep this in balance with the General Ledger Account. 

If the results obtained are not satisfactory, too much 
Material used for work done, or it is found that Materials on 
hand do not agree with the quantities as per the Material 
Ledger, it will be necessary next month to try and fix up the 
department where the waste or carelessness is. This can be 
done with a little thought and care. Further, each month, if 
desired, the cost of any one line can be ascertained by using the 
method explained in dealing with factories under Glass i. 

At the end of the year, when stock taking, the value of the 
partly Manufactured Goods will be included in the inventories 
of stock on hand. 

If it is desired to make the Monthly Statement more exact, 
it is a simple matter to ascertain the value of the Manufactured 
Goods used (Vide Fig. No. 35.) By taking stock periodically of 



WW^W^—*— Ifll 



^@-«.- ... .'.^ 



124 



manufacturers' ACfOlNTS. 



III 

I- I 
I I 

t I 



I i 



Raw Material when it is reduced in quantity a thorough check 
on quantities used can be maintained. By ascertaining then 
the cost of production and the cost of maintenance, and deduct- 
ing total thus obtained from the value of the Manufactured 
Goods turned out for the same period, a fair estimate of profit or 
loss should be obtained. There is an important point to be 
remembered, and it is this - if a slack month is being considered, 
well and good, but if the output for the month is above normal 
it may be misleading, that is, the profits will be above the 
average. 

The estimate of profits is only intended for the guidance of 
the proprietor, and Manufactured Goods Account will duly be 
charged up with their cost as shewn, and sales will be duly 
credited, and profits arrived at at the end of the financial year 
in the usual wav. 



CHAPTER IX. 



LUMBER MANUFACTURERS' ACCOUNTS. 

For the further purpose of illustrating the adaptability of 
the systems outlined to industries of the nature of those enum- 
erated in Class 2, the Authors here give the Accounts of a 
Lumber Manufacturer. 

In the example given, the Manufacturer is presumed to be 
the owner of the Timber Limits under license from the Ontario 
Government, also Timber on land purchased in Fee, and the 
owner of certain of the permanent improvements on the streams 
made for the purpose of driving or floating logs to the mill. 

The mill is built for the manufacture oi Lumber, Shingles 
and Lath. For easy reference, and that the illustration may be 
readily followed, the quantities are given in even numbers and 
the accounts in skeleton. 

We will then start with the Balance Sheet of John Bargin 
& Co. as for Dec. 31st, 1899, as shewn in Fig. No. 37. 

As this work is not intended to be a treatise on the ac- 
counts of any special Manufacturer, we will assume that all the 
entries of the Commercial Accounts have been made, and deal 
only with those necessary to illustrate the process of arriving at 
the cost of the product. 

I 12o] 



^ —iii^^.. -."iiSt^, 



126 



MANUFACTURERS ACCOUNTS. 



LUMBER manufacturers' ACCOUNTS. 



127 



' I 



We will assume then that John Bargin has decided that, 
for the wants of his business, it will be necessary for him to 
take out 10,000,000 feet of logs. After deciding as to the locality 
the timber is to be taken from, the information he would want 
is : 

First — The cost of the logs on the skidways, 
Second — Their cost in the water, 

Third— Their total cost, delivered in the millpond ready for 
sawing. 

William Wood, who devotes his attention exclusively to 
the getting the logs from the forest to the mill, then arranges 
for this supply of logs as follows : 

Camp No. i, iqoo — Foreman, clerk and 70 

men get out ^ 2,500,000 feet 

Camp No. 2, 1900— Foreman, clerk and 80 

men get out 3,000,000 *' 

Contractors (or Jobbers as they are generally 
called in trade), varying in quantity accord- 
ing to locality, get out .3,500,000 '' 



10,000,000 



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128 



MANUFACTURERS ACCOUNTS. 



The accounts, as shewn in Kigs. Nos. 45 and 46, will give 
one the exact cost of the log- product delivered at the mill-pond 
ready for sawing. One thing the Student must always bear in 
mmd -that all businesses ot this kind, which change the form 
of a natural product into a manufactured shape, are more or less 
speculative in their character, consequently the accounts have 
to provide for this condition. 

What is meant in this particular instance, is, that these saw- 
lotrs are scaled or measured in the bush. Such measurement 
can only tell what, in the opinion of the Scaler, the logs will 
produce in merchantable lumber, and while it is true that a 
good and experienced Scaler can come fairly close to it, still he 
cannot see the inside of the log, and until the saw in the mill 
discloses the defects, he can only in a general way allow for 
them. 



In the first instance the cost of the log product per 1000 
feet is determined by the bush Scaler or measurement, which 
measurement has to be adjusted by the actual cost in the mill. 

As we have seen, the accounts, as shewn in Figs. Nos. 45 
and 46, indicate the cost of the logs in the pond, ready to be 
sawn into lumber. There are certain accounts required to be 
kept in the camp, and these accounts are kept in a book known 
as the Camp Ledger and entered straight to the accounts from 
Vouchers or a Day-book. Fig. No. 38 shews the account kept 
with the particular camp in the office, and Figs. Nos. 39, 40, 4 ^ 
42, 43, 44, 45 and 46 shews the various accounts kept, a perusal 
of which will explain them. It will be observed that, with the 
exception of the ''Van Account," they are all closed into the 
Operating Account. Figs. Nos. 45 and 46. 



,1 



LUMBER MANUFACTURERS ACCOUNl'S 



i2J) 



The Van Account is simply a record of goods sold to the 
men. The Operating Account is divided into two parts, the 
first part shewing the cost 01 skidding and the second part the 
cost of hauling as well. 



•N. 



ff: 



l.SO 



Fi(i. No. 38. 



MANUFACTURERS ACCOUNTS. 



ACCOUNT IN GENKRAL LEDGER. Class 2. 
Camp No. 1. 191K). Foreiaan. 



19(X) 



Dec. 



To Provision Ace. as 
per Inventory 

" Cadjrinir .... . . 

" Wajfes* 

" Teams 

" Blacksniitii-shop 

" Re|»air8. 



April 



I 



80 



By Cost of 'i.'i.d^tf) pieces 
of sawlotfs scaling 
2,r>(tO,<XX' ft. delivered 
in waters of Ix)n<r 
Creek ready for driv- 
ing; (a average of 

Chafed to I.rf)ng 
Tradin*' Ace. 19(X» 



Fig. No. 89. 



PROVISION ACCOUNT. 



190U 



To Mour 

" Pork 

" Snjrar 

" Tea 

•' Dried Apples. 

" Beef 

" Currants . . . , 

*' Raisins 

" Rice 



April 



HO 



B\ Cost of hoarding 
men, from Dec. 1 
to April :iuth 

Bv Wa^es j>aid for 
9680 days for one 
man c average of 
b e i n <;• balance 
charged to Oper- 
ating Acc<Jlint 

By Inventory pro- 
visions on hand 
carried forwanl 



Accounts kept in "Camp" in Wook called •' Camp Ledger 
subdivided into accounts, as Provision Account, etc. 



I k 



H 



LUMBER MANUFACTURERS ACCOUNTS. 



131 



In lig-uring up the cost of boarding the men in camp, the 
cost should be determined on the working days. What is 
meant is this. A man may be in camp, for say thirty days, four 
of these days are Sundays and one day he is sick, his time is 
placed on the pay-sheet 25 days, and the cost of board is on 25 
days, not on 30 days. 

If this method is carefully enquired into, the information 
given will always be in the nature of giving an indication of 
this cost being high or low, for two reasons — 

First— Waste in cooking. 

Second — Men hanging round the camp and not working. 
Some firms do not figure in the wages of cook and helper, 
others do. 

The reason given for not figuring these wages is, that the 
cost of comparison would to some extent be influenced if 
changes occur, and different rates of wages paid in other camps 
engaged in the same operations. 



.r 



1 .S2 



Fjg. No. 40. 



MAXUFAC rUREIls' ACCOUNTS. 



STABLE ACCOUNT. 



ii ) Hay 

" Oats 

" Shoeing 

" Repairs to Har- 
ness 

" Expenses, etc. . . 



1900 



By cost of boarding 

— No. of horses, our 

own teams 

Hired teams 

@ avertige price per 
day, charged O}) 
erating antl car-, 
ried forward 

By Hay, Oats, etc.,i 
on liand and ear-' 
ried forward ... I 



The same rule a.s to estimating the cost on actual time 
worked, applies to this account as to the Provision Account. 



Fig. No. 41 



GENERAL EXPENSE ACCOUXT. 



1900 



By Balance for 
month charged to 
Operating Ac- 
c<junt 



\l 



LUMBER manufacturers' ACCOUNTS 



138 



Fig. No. 42. 



VAN ACCOUNT. 



1900 



To Hocks 

L'ndersliirts 
Top.shirts.. 

Boots 

8heepacks. . 



Memo. -This account 
is kept at the camp 
and also kept at the 
office ill (General 
Ledger. 



Fig. No. 48. 



19(X) 



To Wages. 



Memo.— A 1) o v e 
items include 
wages for men 
and teams, same 
being charged 
separately. 



WAGES. 



By Sales charged 
on Time Sheet. 



By Wages of men 
as per T i m e 
Sheet. charged 
Operating Ac- 
count 



i:'.4 



manufacturers' accounts. 



Fig. No. 44. 

HE.AD OFFICE-ACCOUNT IN CAMP LEDGER. 



m>o 



1900 



By Provisions . . 

Hay 

Oats 

(iooils for Van 
Repairs to 

Harness 

Sundries 



Fig. No. 45. 



\m) 



OPERATING ACCOUNT. 



July 

to 
Dec. 



To Provison a c 
. Men at average 
To Stable- 
Board of Horses.. 

at averajje 

Board of Hired 

Team at average 
To Expense a c . . 
Tt> Wages for 

month Men .... 
To Wages o f 

Hired Teams. 



1900 



To Balance. 



By Balance, car- 
ried forward, 
bring cost of 
skidding 

— No. of pieces of 
logs— f e e t at 
average cost of 

— per foot. 

Memo. —No. of 
feet scaled 

— No. of feet esti- 
mated. . 



LUMBER MANUFACTURK.RS' ACCOUNTS. 



135 



Fig. No. 46. 



\\m) 



Jan. 



OPERATING ACCOUNT. - Continued. 



To Balance 

brought forward 

To Provision tty C . . 

To Stable «/t'. . 

To Expense njc . ■ ■ 

To Wages ft o, men 

To Wages a/r, 

teams 



1900 



By Cost of 
skidding 



By Cost of hauling 

pieces at 

average amount 

of feet per 

piece. feet 

average price 

Memo.— Total 
Cost of skidding 
and hauling to 
water to date. 
Delivered in 
water, logs cost 

per m feet. 

'J'otal carried for- 
ward. 



Feb. 
to 
Apr. 



To Balance 

To Provision o/c 

To Stable 't/c... 

To Expense o/c. 

To Wages a/-, 
men 



To Wages ajc, 
teams . ... 



By Cost oi 
skiddinif 



By cost of hauling 

pieces 

feet at average 
price of .... 

Total Cost liauled 
to water . 



I 



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M ANUFACTUK Klis' ACCOUNTS. 






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a; «S _ _ 



LUMllER manufacturers' ACCOUNTS. 



137 



We have now to consider what books must be provided to 
g-et at the cost of sawing the logs into lumber. First the loi4>> 
will probably be sorted according- to size and quality, and also 
those that it is considered could be more profitable to manufac- 
ture into shingles than lumber will be picked out, put in a 
boom by themselves and sent to the shingle mill. 

Lath is manufactured from lumber refuse, such as edgings 
and slabs. We will now presume that the Manager has decided 
as to the kinds of lumber and the size he will have the loirs 
sawn into. In this book we are not dealin^r with matters of 
policy, but simpl} with facts that will tell him results. 

To let us know such results in an intelligent manner, the 
following books would as well as any give the information 
necessary. 

I St. Time Book or Wages Book. See Fig. No. 48. 
2nd. Mill Book. " " "49- 

3rd. Sales Book. " " " 50. 

and the following accounts in General Ledger:— 

Mill Maxufacti^ring Account. To this account will be 
charged all the expenditures necessary to keep the mill in first- 
class repair, including the cost of keeping the refuse burner 
and boilers that supply steam for the steam feeds and other 
machinery. Wages of the men engaged on the sawing floor 
and supplies of any kind necessary to the manufacture oi the 
product. 

Shipping Account.^To this is charged the expense of the 
inspection of lumber at time of selling and shipping, and all 
wages of men engaged in loading the transportation vehicles 
whether in the shape of boats or railroad cars. 



138 



MANUKACTUKEHS ACCOUNTS. 

4 



LUMBER manufacturers' ACCOUNTS. 



139 



t 



I 



Lumber Sales Account. — Into this is credited all sales 
which have been made during^ the year, such book providing 
for the keeping of an accurate count of the quantities, as it is 
from the count in this book that all figurings of cost are based. 



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140 



manufacturers' accounts. 



Ll-.MlJKk MAXIIFACTUKEHS' ACCOUNTS. 



141 



We will presume we have now arrived at the final stai/e oi 
the operations, and all the lo^s are manufactured into Lumber, 
Lath or Shing-les, except such as it is desired to carry over ^o 
the next season, and it is desired to know the followinir facts 
for future use : 

1st. The AVERAGE PER I ,ooo FEET cost of the loiTs deliv- 
ered in the millpond ready for sawinir. 

2nd. The cost of sawing said logs, and the product 
realized from the operation, keepini,-- separate the g-ood lumber 
from the cull lumber. 

3rd. The cost of shippin'g and distributing- it to the 
consumer. 

4th. The totaf. cost. 

From the information that has been recorded in the camps 
and from records kept at the mill, at the end of the financial 
year we draw up the followini^ accounts: 

1. Log- Trading Account. 

2. Lumber Tradinir ^Account. 

3. Shingle Trading Account. 

4. Lath Trading Account. 

Fig. No. 52 gives form of Log Tradi.ng Accol.nt. The 
first entry on debit side is inventory of logs on hand at the 
beginning of the period. Then follows the costs from the 
various camps, being the balance of their Operating Accounts 
closed with this account. 

The credit side shews mventory on hand carried over to 
next season, and the quantity of logs transferred to Shingle 
Account and Lumber Account. 



L8 



From this account we can then obtain the average cost of 
the logs delivered in the millpond ready for sawincr. 

Fig. No. S3 ^hews Limber Trading Account. The logs 
credited to the Log Trading Account are charged here in the 
first entry. Then the various costs are shewn This account is 
credited with all the sales made and the balance is transferred 
to the Profit and Loss Account. With reference to the Shingle 
and Lath Accounts, shewn in Figs. Nos. 54 and 55, note that 
only the cost of manufacturing them is charged. They are 
practically by-products made from what would be otherwise 
waste. 

In dealing with by-products generally, it is usually best lo 
merely record the cost of manufacturing without attempting to 
value the cost of the Raw Material. The gross profit made aui 
go direct to the Profit and Loss Account or the main Trading 
Account. In some industries there is more profit made out of 
by-products than on the main product manufactured. 

Apportionment ok General Expenses. ^We have not 
attempted to apportion this account, except the mill manager's 
salary, etc., as shewn in Lumber Account, as in the actual 
practice the gross profits are credited to the Profit and Loss 
Account, and the general expense is charged to this account. 
Should it, however be desired to apportion to the Trading 
Accounts separately, it could be done on the basis of so much 
per thousand feet of lumber, taking the general average output 
as a basis. 



142 



MANUFACTURKRS ACCOUNTS. 



LUMBER MANUFACTURERS ACCOUNTS. 



143 



Fig. No. 49. 

REPORT OF LUMBER SAWN AND LATH SHINGLES. 
Manufcictured by John Bargin & Coy'a. Mill, 19<)l. 



Description. 



Stocks 



Sidings 



Strips 



Cull 



Total 



Where logs from 

Scaled by 

Logs 

Circular cut " 

Band saw cut " T(>tal feet good Lumbei 

(Jang saw cut " ^. ^' cull 

Total 

Total mill cut logs from pond. 

Lath cut 



% 
% 



t 



I, 



1 



Fio. No. 50. 



SPECIMEN OF LUMBER SALES BOOK. 



Feet 
Luml)er 



Pieces: Pieces 
Latli iSliingle 



Name (tf Party 
charged, date, etc. 



Total foi' Month 



Price Value 



Value Value 



Fig. No. 5L 



No. of loefs cut. 



SHINGLE MILL. 



Shingles made. 




XX Pieces \X\ Pieces 



Signed 



Mill Counter 



144 



MANLTFACTUKERS ACCOUNTS. 



Fig. No. 52. 



isw 



LOG TRADING ACCOUNT. 



190() 



m I 



Den. 31 l!To log.s on hand as 
per iiiventoiv, 

ItMX) 9,7o(>,(XXKc ' 

Dec. .31 To Camp Xo. 1, 

2,")00,»MH> (<s 

To Canjp No. 2, 

3,(H)0,(MM» (a 

To taken out hv Job- 

bers,.">,«MM>,<M>()ft.rf/ 

To Crown l)nes on 

lo.rKMJ.fMM) ft.r^^ . 

Memo -A million ft. 



free of l*iies. 



Total -io.-ioO.rMMJ ft. 



Fui No. oS. 



Dec. 31 By inventory logs 
on haml carried 
over to next sea- 
.son, 3,(MM),(KX) ft. 
being 24. (><)(> 
pieces (a 

By Shingle Account 
l,(MM),(KW) ft. (a . . 

Hy Lumber Account 

'l«,-i.-)(),(MH)ft.goo<l 

lumber (a 



LUMBER TRADING ACCOUNT. 



average 



1900 

Dec. 31 To Log Trading '</c, 
mn 16,2.'>O,0«K) ft. (a... 

Dec. '^1 ToMillManufactur- 
ing a '•, l)eing cost 
of manufacturing 
al)ove logs into 
Lumber, product 
beinglb.OOO.OOOft. 
of good Liunl)er 
an4 4/2.")0.iMM>ft. of 
Culls at 
price of s 
To Shipping n '•, be- 
ing shipping, in- 
specting and haul- 
ing •2()?2'*n*^)n ft. 

((^ 

To General Kxpense 
(Charges, being pro- 
portion of Mana- 
ger's salary, othee 
expenses and inci- 
dentals say Or ... . 
(Charged monthly) 

To Balau'C 
Profit and Loss n/r 



1901 



Dec. 31 



By Lumber Sales 
Book credited 
lUonthly 

Total for year as 
follows: l(i',(MK),(MM> 
ft. good Mill Run 

(a). 8a\' $ 

average 

4,-2r)(>,()00 ft. Cull 
Lumber (a say 
$ 

Memo. — 

Carry forward of 
above b,(MM),(MM> ft. 
good Lumber and 
2.i(>,0(H> ft. of Culls 
(ctj, same price. 

By Profit on 
Sliingle (ifr . 

By Profit on Lath 
a/r. ^ 



¥ 

m 



'*^=- 



LUMBER MANUFACTURERS ACCOUNTS. 



145 



Fig. No. 54. 



TRADING SHINGLE ACCOUNT. 



^ 



1000 

Dec. 31 To inventory 

Shingles on liand, 
pieces XXX .... 

1901 

Dec. 31 To Log Trading ^//r, 
1,000,000 ft. rg 

To cost manufactur- 
ing above logs into 
16 in, Shingles: 
. . . .pieces XXX 
.... " XX 
.... " X 

To gross profit trans- 
ferred to Lumber 



15)01 

Dec. 31 Bv sales from Sales 
Book : 

. . . .pieces XXX (a 
per thousand 
pieces 

pieces X X (c 

per thousand 
pieces 



'( r 



pieces X (o 

per do. do 

Inventory : 
Shingles on hand, 
. . . .pieces XXX 
.... " XX 
... " X 



!■ 



Fig. No. 55. 



LATH TRADING ACCOUNT. 



1900 

Dec. 30 To inventory : 

. ..pieces Xo. 1, .$ . 

... " No.2, .S.. 

1901 1 31 To cost of maiMifac- 
Dec. 



turing. 



(iross profit. 



lO 



10(11 



Dec. 



31 B\' sales : 

.... pieces Xo. 1 



No. 2. 



Inventorv : 
No. 1 
No. 2 






CHAPTER X. 



IN CONCLUSION. 






There are one or two special points in connection with the 
question of the normal output of the factory, which was 
considered in a general way when we were discussing the 
method at arriving at the proper percentage at which to charge 
factory expenses on the labor expended on any given job, that 
we now desire to explain. Every Manufacturer should 
establish or ascertain what is the normal output of his factory, 
and the following illustration will afford one of the advantages 
of having this recorded. It stands to reason that if the sales 
for any given year are doubled, that the percentage of expense 
must decrease, and we will suppose that the average output for 
a number of years is $150,000. Towards the end of the current 
ten months it is ascertained that the business done, with the 
business in sight for the next two months, amounts to $125,000. 
Now all the calculations as to rate to charge factory expenses 
were presumably based on $150,000 worth of business being 
done, therefore if less is done the profits will suffer, and it will 
be more advantageous to do $25,000 extra business at little or 
no profit, and maintain normal percentages of costs, than to be 
content with the smaller output which covered higher profits. 

Some Manufacturers think that the rate to charge factory 

expenses on the work being done should fluctuate as the 

( 14() 1 



i 



i 



IN CONCLUSION. 



147 



particular year is prosperous or not. Now we stronglv contend 
that the rate should be fixed on the basis of a normal output, 
determined, if the factory has been running for some years, by 
the average of, say a period of five or ten years ; if an entirely 
new factory, on its fair manufacturing capacity. 

By this method, should there be a larger increase in the 
sales, greater profit will result, on the contrary, diminishing 
sales, less profit. It is on the principle here involved that the 
factory conducted on a large scale can always make larger 
profits that the smaller competitor, and further, the Profit and 
Loss Account should clearly state the amount ot profit or loss, 
as the case mav be, resulting from the fluctuation in output 
above referred to. 

Percentages on Sales.— This has been before referred to, 
and it may be useful to here give an illustration of a set worked 
out, with a practical method of saving work and time in so 
domg. 

TRADING ACCOUNT. 



190() 

Dee. 31 To Inventories 41,641.11 

1901 

Dec. 31 To Purchases 140,972.65 



1901 

Dec. 31 By Sales 196,r)13.01 



182,614.76 

Less In vent - 

tories stock at 

present date 48,678.02 

133,936.74 

To Wages 26,151.69 

' ' Factory Expenses .... 6,862.72 
" Gross Profit 29,561.86 

$196,531.01 



:$196,513.0l 



'■■.f 



If 



148 



MANUFACTURE us ACCOUNTS. 



PROFIT AND LOSS ACCOUNT. 



1901 




1901 


Dec. 31 To Insurance 


7o2.99 


Dec. 31 By Gross 


" Express Chgs. 


165. 32 


Profit.. 


" Salaries. . . . 


4,6«9.1>2 




" Telephone, 






etc 


1-26.17 




•' Travelling Ex 


193.00 




" Advertising . 


394.27 




" Stat i oner V. .. 


78.76 




'• Cars 


81.0.") 




" Postages 


132.69 




*' Sundries 


41.44 




" Legal Exs.... 


4.").(H> 




*' Auditor's Fee 


20<).(X> 




" Commission 






on Sales . . . 


3,466. 9<i 

10,347.57 





29,561.86 



IN CONCLUSION. 



149 



In order to save labor, prepare a short statement of the 
several multiples of this divisor, as follows : 



" Inteifst and 

Exchange 4,437.92 

" Donations 172.28 

" Taxes 160.25 

*' Hit D. Debts Account 3,4.30.46 
" ProHt for year 11,013.38 



.'?29,.">61.86 



.529,56L86 



In makino^ comparative percentage statements, it is usual to 
base the percentage on the amount of net sales. 

To obtain this percentage, multiply each item by loo and 
divide. by 196,513.01 the amount of the sales. 



196,51.3.01 
196,513.01 

393,026.02 
196,513.01 

589,539.03 
196,51.3.01 

786,052.04 
196,513.01 

982,565.05 
196,513.01 

1,179,078.06 
196,513.01 

1, 375,. W 1.07 
196,513.01 

1,572,104.08 
196,51.3.01 

1,768,617.09 
196,513.01 
1,965,130.10 



- 1 times 



— O 4t 



- 3 



= 4 



-r 6 



= 8 " 



9 



10 " fjroving correctness of table. 



Then enumerate the various items as follows, working out 
the calculations as above shewn and using table when making 
divisions. The results are here given. 



1 



i 



: t| 

m 






150 



manufacturers' accounts. 



Merchan<lise 


133,936.74 


Wages 


26,151.69 


Factory Exs. 


6,S62.72 


Insurance 


752.99 


Express Chgs- 


16."). 32 


Salaries 


4,669.92 


Telephone 


126.17 


Travelling Exs. 


193.rK> 


Advertising 


394.27 


Stationery 


78.76 


Cars 


81.05 


Postages 


132.69 


Sundries 


41.44 


Legal Exs. 


45. (H) 


Auilitor 


200.00 


Comni. on Sales 


3,466.96 


Interest 


4,437.92 


1 )onations 


172.28 


Taxes 


160.25 


B. & D. Debits 


3,430.46 


Profit 


11,013.3S 




$196,513.01 



X 100 H- 







Percentage 






of Sales. 


19<),518.(U 


=; 


68.16 


M 


z= 


13.30 


«f 


— 


,3.49 


»( 


— 


.38 


it 


:= 


.09 


»( 


:= 


2.38 


t( 


= 


.06 


ti 


=:: 


.10 


it • 


= 


.20 


tt 


=r 


.04 


4 t 


:= 


.04 


* 


^=" 


.07 


tt 


— 


.02 


ti 


=: 


.02 


t. 


= 


.10 


tt 


= 


1.77 


it 


=: 


2.26 


tt 


z= 


.09 


t( 


= 


.08 


(( 


= 


1.75 


tt 


""■ 


5.60 
100.00 



Depreciation. - Every Manufacturer should set aside a 
certain sum every year out of the Revenue Account, to provide 
for depreciation in plant, machinery, buildint^s, etc. What this 
amount should be will depend upon the nature of these assets, 
and the amount of v^rear and tear they are exposed to. This 
matter of depreciation requires careful consideration, and if an 
arbitrary rate is fixed upon, it should be carefully verified every 
few years by a thorough valuation and fresh inventories taken. 
Every factory should keep a Machinery Register, in which all 
the machines are entered with their proper number, which num- 
ber can be painted on the machine itself. When repairs or re- 
placements are necessary, an order should be made out and a 



IN CONCLUSION. 



151 



record of this entered in the Machinery Register opposite the 
particular machine. This is very useful, not only to see that 
the machines are being properly cared for, but in some cases as 
a test of the machine itself. It is an obvious fact that a cheap 
machine is costly it endless repairs are required to keep it in 
running order. All repairs and di.splacements should be charged 
to Repairs Account. If this is done and the machines maintain- 
ed m first-class order, a lower arbitrary rate of depreciation can 
be provided for. 

It is unfortunately too often the case, that all replacements 
are charged to the Machinery Account, and this asset may be 
thus increased without any real corresponding value, and profits 
are shewn which are not earned. 

There is another point which may be referred to. It is 
better to open a Machinery Account, the balance at which 
should agree with the total value of machines as entered in 
Machinery Register, and this balance should not be altered 
except when new machinery is bought or machinery sold. 
Each year credit to a Reserve Account the amount of deprecia- 
tion decided upon, but do not deduct this depreciation from the 
machinery balance. In case of fire, the machine is worth to the 
Manufacturer what it would cost to replace it, not necessarily 
the amount in his books, and if he has been reducing its value 
year by year by writing off depreciation, aud if the Ledger 
balances show a smaller figure than the amount claimed after a 
fire it leads to di.sputes and possibly litigation. 



lo2 manufacturers' accounts. 

REMARKS ON ESTIMATING COST. 

There is also another matter which we think it is of import- 
ance to call attention to, which affects the methods used by a 
great many manufacturers who make up Lumber, Steel Plate, 
Leather and such like commodities into the manufactured article. 
In estimating- the cost of such manufactured article the element 
of Waste has to be considered. Take a manufacturer in 
Lumber for instance ; He is asked to put in a tender for 
supplying say i ,000 articles, which he figures will take 25 feet 

of Lumber each. The unit on which he will base his calcula- 
tions will be 1,000 feet Board Measure oi the particular kind, 
and he will base his price on so much per 1,000 feet, Hoard 
Measure, finished. 

We will assume that he has satisfied himself as to the fol- 
lowing facts : 

I St. That the quantity of Lumber in each article is 25 feet. 



2nd. That the Lumber in the rough is worth $20 per 1,000 



feet. 



3rd. That the cost of Manufacturing is $5 per 1,000 feet, 
including Indirect expenses. 

4th. That the Waste in cutting up is 20,^ on the rough 
Lumber. 

5th. That he wishes to get 25% profit on his selling price. 

Having these facts before him, they may be figured in three 
ways — Unit 1,000 feet Board Measure. In shewing these com- 
parative methods only the Material, the Waste, and the Labor 
are considered. 



IN CONCLUSION. 



ioH 



*' A " Method : 

Lumber $20.00 

Waste 20% 4.00 

Labor 5.00 

29.00 
P'-ofit25% 7.25 

Total 36.25 per 1,000 feet. 



Therefore, each article taking 25 feet of Lumber will be 

25 

-16.2:; X = QO-; cents each. 

^ ^ 1,000 ^ 

'' B " Method : 

Lumber $20.00 

Labor 5' 00 

25.00 
Waste 20% 5-00 

30.00 
Profit 33/3 10.00 

Total 40.00 per i ,000 feet, or 

$1 each article. 
" C " Method: 

Lumber $20.00 

Labor 5-oo 

25.00 



In the two former methods it has been overlooked that the 
percentage 20% of Waste is on quantity of rough Lumber used, 
and not on the quantity being valued in the estimate. F^or in- 



■y— 1 



154 



manufacturers' ACCOUNrs. 



stance -out of i,ooo feet of Lumber 800 is obtained. To obtain 
this 800 feet has cost $25.00, what is this then worth per 1,000 
feet finished ? 

as 800 ft. : 1000 : : 25 : etc. 

1,<300 X 20 . 

^^ ~^80) " $31-25 cost. 

-25% profit on selling price 

equals 33 13% on cost 10.41 

Total, 41.66 per thousand feet, 
or $1.04 each article. 

It will surprise many of our readers to learn that a great 
many are to-day figuring their cost under Method " A." 

Method *' A " is Wrong. 

(i) In only adding Waste on the Lumber at 20%— overlook- 
ing the fact that the Labor must bear its share, and that out o( 
1000 ft. only 800 feet came out as manufactured. 

(2) In falling into a common error that 25% on the cost is 
the same as 25% on selling price. 

(3) That the Waste is not 200 feet on 1000 feet, but 200 
feet for every 800 feet turned out, or 25% instead of 20%. 

Method " B " 

Is also defective as regards percentage of Waste, though 
the other errors are avoided. 

Method " C " 

Shews the correct method. 



PART III. 



In the following pages we have endeavored to give some 
practical and useful forms of books and accounts. Some of the 
forms are original, but the .Authors' wish is to provide the 
Book-keeper with forms which he can use with advantage and, 
moreover, with confidence. In some cases we have shewn 
alternate forms, advising when they should be used. 



[15o] 



":'il^Ulim>M..^,-^-^ 



CHAPTER XI. 






CASH BOOK. 

In Fig". No. 56 is shewn a form of Cash Book, which is very 
simple — By charging all such items as interest, Wages, etc., to 
the Expense Column, and then detailing- all the items in the 
Distribution Journal (See Fig-. No. 5), much time can be 
saved in posting. The totals of all columns should be posted 
weekly or monthly excepting sundry accounts, which must be 
posted item by item to the Ledger. The headings to the 
various columns are of course not arbitrary. 

Fig. Xo. 57 is a very useful form as it provides a Cash 
Column, and a ready means of balancing- cash daily. The 
deposits are entered under heading " Bank " on the left side. 
Should the monies paid in be at once deposited they can be 
entered in Bank Column, if not enter them in '* Cash," and 
when making: deposit, charge "Cash" on right side and "Bank" 
on left side. The cheques are entered as provided for, and 
when necessary extended to special columns, e.g., Bills Payable. 
When payments are made in cash they are so entered. 



Fiir. No. ^8. — When this Cash Book is used a special 
journal is required for the Bank Cheques, Notes, etc, (Vide 

Fig. Xo. 59). 

• [ 1"'7 1 



...S^ -S^^ fc-^-i^^'J-.-'SBSigfi 



15» 



MANUFACTURERS ACCOUNTS. 



For a business usinj;- a large number of cheques, or keeping- 
more than one banking account, this is probably the best 
system. This is essentially a Cash Book, and when all 
payments are made by cheques, excepting petty cash payments, 
which should be kept in a separate book, the only entries on the 
right-hand side will be the bank deposits and exchange. The 
left-hand side can be ruled as required. In any Cash Hook 
where it is required to separate the accounts into separate 
Ledgers, such as A to K and L to Z, it is generally wiser to 
keep a separate personal Cash Book and bring daily totals into 
General Cash Book. Provision would have to be made through 
all the books if separate Ledgers are kept and are to be 
balanced separately. 

Fig. No. 60 shews form of Petty Cash Book which requires 
no explanation. 



O 

o 

X 



CO 



I—* 



CASH BOOK. 



159 



1«3<'X: 






asti3<i\3 



JJUHH 



s:^'inoo.)y 



qunoosiQ 



a 



3»«(]| 



I«10X 









Ajputis 






e3 



3j«a 



I 

1 




160 



O 



< 
'J 






MAXUFACrUREKs' ACCOUNTS. 






io ox 






asuadxg 



5uiio.>s;q 



M'^".! 



•oj 



3 



-n^d 



>i"''ai 



)SdJ»3UI 



sum 



^iin<).isi(i 



qsBO 



•OjI 



aiB(I 



' > 



' 



O 

o 

en 









CASH BOOK. 



161 




II 






ssmmr.tfSi.si'i'tM'M'-mirigf^ 



162 



d 



O 



MANUFACTURERS ACCOUNTS. 






o 

«2 






C 



u 

< 






X 



•0.4 



■ju.iuv 



lunoosiQ 






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o 

a: 

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< 






CASH BOOK. 



\m 




164 



MANUFACTURERS ACCOUNTS. 



PURCHASE JOURNAL, FIG. NO. 6i. 

This book requires little explanation. The object of having- 
the column " Freight in and Duty," is to enable this to be 
charged with the invoice to the proper department or account. 
To do this each inxoice must be charged with the proper amount 
by means o\' a suitable stamp ; and the cashier should be 
instructed to pass no such payments unless this is done. The 
total of this column is posted to the credit of account each month 
and should close or balance same. 

Another method is to make a list of Accounts Payable in a 
book, credit all the merchants in the usual way to the debit o\' 
Purchases Account as the case may be. When this is done the 
invoices are charged to the proper departments through the 
Distribution Journal. ^ 



A. 



O 
O 

w 

o 
> 



o 

O 



O 

w 

< 
X 

u 

a, 



o 
o* 



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c 



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< 





• 


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o 






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<a 


c 


^ 


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^3 



X 






i'URCHASE JOURX.\L. 



165 










«3 
£.1 



301OAIIJ 
P "ON 



0) 



,* 1 



1^ 



1(J6 



Fig. No. <i2. 



manufacturers' accounts. 



PURCHASES RETURNED, 



Date 



!| 

From whom poijo 



Bought 



Amount 



Department to he 
Credited 



SAl.KS RETURNED. 



167 



Fig. No. 63. 



SALES RETURxXED. 



Date 



•T 



Customers to he 
Credited 



Folio 



Amount 



Dejwrtnients to he 
Ciiarged 




u 



168 



MANUFACTURERS ACCOUNTS. 



DISTRIHI'TIOX JOl'RXAL. 

This is a inost useful book, as it enables totals onlv to be 
posted in the Ledi^^er, and yet provides for the fullest details 
beiui^ kept. 

Supposinjj;' one account •" ['Expense " is kept in the Ledger 
this book will shew details of all items, and headiui^s can be 
further subdivided if necessary. Supposinj^^ such items as 
VVag-es, Discount, Interest, have been kept under this headini^ 
"Expense" to sa\e extra columns in the Cash Book, periodicallv 
the totals of such items can be charijed to their proper accounts 
and credited " Kxpense " account. 

In a business where there are a number of departments it is 
far better to shew details in this book than to open a number of 
accounts in the General Ledirer. 



/ 



< 



o 

H 

5 
H 



DISTRIP.UTION JOURNAL. 



169 






U 






d 



T 






iii 



170 



MAN I ■ FACT! • RE lis ACCC ) I 'NTS. 



BILLS PAVABLL BOOK. 

The form shewn in Fii,^ No. (\s is far simpler than the form 
commonly used. The due date is kept in one column. In 
practical business a diary or " tickler " is ^^enerally kepi, so this 
gives the required information. For posting-, the form i^-iven 
is far preferable, as the account and the amount to be chart^-ed 
are close toi^ether. 

Where two Personal Ledg-ers are kept, the column headed 
"Amount" should be supplemented with another column 
headiui;, one A to K and the other L to Z, as the case may be. 
It is a comparatively simple matter to balance .A to K Ledi^er 
bv itself, if you trace and provide for all debits being- under a 
column .\ to K, and similarly with all credits. By grouping- 
all these items together monthly the correct balance can be 
readilv arrived at. 



The same remarks apply to Fig. No. 66, Bills Receivable 



Book. 



d 
d 



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i 



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BILLS PAYABLE BOOK. 



171 



o 

o 






' ! 



I 



i I; 



172 



M A \ r FACT V R ERS' ACCOU NTS. 



O 

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25 



B 



c 
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S.'c 



COLUMNAR LEDGER ACCOUNT. 



178 





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174 



manufacturers' accounts. 



BALANCE SHEET— Fig. No. 68. 

Sheuinir ^^ f^^nn of Balance Sheet. It is a matter of opinion 
as to whether the LiabiHties should be placed on the left side 
or the rii^ht. The leadin-" accountants in England and Canada 
as a rule adopt form as shewn. 



FiG No. 68. 
of the 



BALANX'E SHEET. 



BALANCE SHEET. 

as on 



r.IABILITIKS. 

To Tkadk Crkditor.s. 

On Bills Payable, 
On Open AccouMt 

SiNDRV C'KKDITORS. 



On 0))en Account . . . 

Secured 

1 iisecured 

On Hills Pavahle 



I'ROvi.sioNs Made. 

For such Accounts as 
Waifes Accrued due, etc. 

Hksk.rvk Find. 

•Set Tside out of luotits, 
and either specially in- 
vested or included 
anionyst the ;.'encrai 
Assets. 

This Fund is t\ot in- 
tended to he touched .... 

RKSRRVK .ACCOt NTS. 

Set asi<le out of profits 
for such purjiose as De- 
l>reciation iu Huildiny-s, 

Machinery, etc 

For any sjtecial Contiu- 
uency 

Profit ani' Loss .\( cdi xt. 

Bein<r halance at credit 
of account at einl of 
financial period 



INDIRKCT LlAKlLlTlKS. 

This item is usually not 
extended into the hal- 
aiice-.sheet, and includes 
such items as — 

Lialtility on Bills dis- 
counted 

Liability as Guarantor. 

Liability on Disputed 

Claims, etc 

rAiMTAii Stock Accoi'nt, 

Cnder this head i ii -■ 
should be shown— 

Capital stock Author- 
ized 

Capital Stock Sub 
scribed 

Capital Sto:-k Paid in.. 



ASSETS. 



Cash. 



On hand. 
In Bank. 



. Trad'' Dkktok.s. 

On P.ills Receivable 

On Open .\ccount 

On 0\erdue B lis if tiot 
eharfjed to Account. 

StNDRV DkKToKS. 



Secured . . . 
In seen red. 



Mkhchani'isk. 

Raw Material 

Stores 

Manufa<tured ^'oods 

Partly .Maiiu fac tured 
|.40ods 



Ma( iiiNKRv ANI) Plant. 

Machinerv 

Plant ." 

Furniture and Fittin«fs. . 



Pkoi" riv .and Rkal Estaik. 

Land Freehold or Lease- i 

hold 

Buildinjfs 

Improxenients 



0th KR Asskts. 

Such as Insurance jtaid 
for in ))erio(l and un- 

eariietl 

Interest due, if anv, etc., 
etc 



M MO 



From item Trade Debtors 
deduct pro\ ision tor Bad 
and Doubtful delfts. 



175 




f 



17ii 



MAX U FACT I ■ II KKS ACCO U N TS 



STOCK SHEP:T— Fig, No. 69. 

Fig. No. 69 shews a form bv w hich the transactions in each 
line of goods is recorded. Where these lines are not very 
numerous, these sheets or cards can be entered daily, and a 
complete record kept oi' the turnover and also the balance on 
hand in any one line. This is a most usetul system, as these 
sheets can be arranged alphabetically on a file. The cost price 
of each line can be recorded at foot, and thus gross profits are 
easilv estimated if wished. 



STOCK SHEET. 



Fjg No. 69. 



STOCK SHEET. 



o 



o 



l>at( 



In 



Out 



Balance 



Dat 



f I In 



177 



Out 



Forward 



Balance 



Forwatfl 



Name of Line 
No. 



12 



tit4i>MWimtm>immmmmi^^ma 



It 



5* 
i i 



178 



M AN U FACT U RE RS' ACCOU NTS. 



Where a business has agencies, by having daily reports sent 
in a complete record can be kept at the Head Office of their 
stock, etc. A form of daily report is here shewn in Fig. No. 70, 
which explains itself. 

There would be, of course, a set of Stock Sheets kept at the 
Agency, and a duplicate set at the Head Office would be written 
up from the daily report and the balance on hand checked 
therewith. This is thoroughly practical, even if the lines sold 
number over two thousand, as the lines can be arranged 
according to names and also to numbers. The forms shewn are 
in actual use. Onlv quantities are therein dealt with, not 
values, which are recorded elsewhere. The forms shewn are 
very simple, and further particulars can be recorded if required. 

When goods are added to stock by the agent, or sent by 
Head Office, same are charged under column '^ In," and advice 
dulv sent, always advising " Balance on hand." 



DAILY REPORT OF SALES. 



179 



Fig. No. 70. 



DAILY REPORT OF SALES. 



To be used in conjunction with Fig. No 69. To this sheet 
agent should attach copies of invoices. 



<> 



Date 



No. 



Q'ntitv 
Sold^ 



Barnce 

on 

hand 



Name of Line To Whom sold 



Amount 




fflWW 



180 



MANUFACTUREK8 ACCOUNTS. 



SALES BOOK— P^iG. No. 71. 

Where it is required to record the average selling" price of 
certain lines of goods, such as Shingles, Flour, etc., this form of 
book is very convenient, and by keeping the Ledger Account in 
similar form the average can be obtained at the end of the year. 



SALES BOOK. 



181 











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182 



M AXU FACTURERS ACCOUNTS. 



C. O. D. SALES REGISTER— Fig. No. 72. 

Where there are a number of C.O.D. sales this is a useful 
practical form. 

As each sale is made it is entered on Invoice, and these 
should when possible bear consecutive numbers. If the 
package is charged for it is included in the account to be 
collected. The right-hand side provides for packages returned 
and allowances. The summary oi the three Cr. columns will 
balance with the Total column and this amount has to be 
accounted for by cash and returns. 

At the end of the month if there are any outstandings the 
book should be ruled oft' bringing down balance of these 
outstandings under the cash received and carrying same 
balance forward to Cr. Total column, subdividing same into 
departments, etc. A form similar to this can be used to record 
cash sales, when packages, etc., are charged - a Freight column 
can also be added if necessary. 



I \ 



\ 



V 






C. O. D. SALES HEOrSTER. 



183 





Dr. 
Allow- 
ances 
Dept. B 










Dr. 
Allow- 
ances 
Dept. A 










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* 184 



MANUFACTURERS ACCOUNTS. 



FORM OF MONTHLY STATEMENT— Fig. No. 73. 

Every manufacturer should have rendered him each month 
a statement shewing- him the transactions of his business, as 
well as his position as re ards his Liabilities and the Assets 
wherewith to pay them. Such a statement as shewn here not 
only gives this information, but if kept up reg^ularly provides a 
comparative record which is very valuable. Every factory 
should keep a record of its output, as by so doing- it affords a 
check at the end of the year on the valuations, more or less 
estimated, which have been placed thereon when sent into the 
warehouse. 

A form with somewhat different headings should be drawn 
up monthly in all businesses. ' 



ci> 



FORM OF MONTH LV STATEMENT. 



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MAY 1 91994 



COLUMBIA UNIVERSITY LIBRARIES 





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